Letter to Provincial Ministers regarding Bitou’s proposed R38 million loanJanuary 21, 2023
Report back to MembersFebruary 17, 2023
Dear Premier Winde,
Thank you for your prompt reply. We are soothed but unfortunately far from reassured.
To foster a better understanding of the dilemmas we face in Plettenberg Bay, I respond plainly to your suggestions and comments.
It is interesting to note that Provincial Treasury is almost ad idem with us. However our members, as the people who will ultimately have to pick up the tab for whatever money is borrowed and inevitably mismanaged, have expressed very strong feelings against any borrowing of money until such time as the requisite capacity to actually manage our finances responsibly have been put in place by council and the administration.
We are well aware of the dire need to invest in capital projects that will drive the economy and attract investment to provide jobs for the thousands of unemployed people that have settled here. They have been provided with housing and services with insufficient thought given by the authorities as to how they will pay for the services and maintain their houses etc, not to mention who will actually pay for the services consumed.
Plett has indeed attracted their share of the Semigrants and it is indisputable that they require services. But one must bear in mind that in the main, they reside in developments which have long since contributed to whatever services and infrastructure may be needed through augmentation levies as well as paying property taxes and high service availability charges.
As far as maintenance and upgrading of infrastructure is concerned, we, as an association, have pleaded for years that these aspects receive the attention and expenditure they so obviously demand. Our pleas fall on deaf ears.
We are all aware that there are times when it is necessary for any entity to borrow in order to fund essential capital works. This is not such an occasion.
Against the background of a bloated organisation structure, burgeoning wasteful expenditure, dysfunctional supply chain management, poor consequence management, shockingly poor budgeting, and a lack of capacity on almost all fronts, it is folly to borrow money and especially for that which has already been paid for.
The budget allows for “fat” in excess of R100 million for this financial year alone. This is a fact admitted by the Executive Mayor and MM. It is enough to fund more than double the proposed borrowings; all that is needed is the political will, strong leadership and competent management. We have offered our members’ expert assistance, and have as an Exco, tried our best to participate and assist but to no avail.
Our town is in dire financial straits and we cannot allow reckless and irrational decisions to drive it over the proverbial cliff.
Again, we very much appreciate your response and that of your Provincial Treasury, and support the good job you are doing in the Western Cape.
With best regards,
cc: David Savage
From: Alan Winde
Sent: 08 February 2023 07:10 PM
To: Plett Rate Payers
Subject: FW: Letter to Provincial Ministers regarding Bitou’s proposed R38 million loan
I have engaged the Minister of Finance and the Head of Treasury in the province on the loan proposed by the Bitou Municipality as per your request.
Please find the treasury comments attached and the comments from the head of treasury below.
I must also say that in general across many of our municipalities they are not borrowing sufficiently for infrastructure investment and with the high semigration happening into our province we must make sure that we are investing in capital projects that will enable the economy, investment attraction and services to keep up with demand. We must also make sure the sufficient investment is being put into maintenance and infrastructure upgrade.
Thank you for writing to me in this regard and I trust this reply is of assistance.
Best regards Alan
OFFICE OF THE PREMIER
Premier – Western Cape Government
Tel: +27 483 4630
Address: 1st Floor 7 Wale Street Cape Town 8000
From: David Savage <David.Savage@westerncape.gov.
Date: Wednesday, 08 February 2023 at 17:16
To: Mireille Wenger <Mireille.Wenger@westerncape.
gov.za>, “firstname.lastname@example.org ” <Alan.Winde@westerncape.gov.za >
Cc: Russel Brueton <Russel.Brueton@westerncape.
Subject: RE: Letter to Provincial Ministers regarding Bitou’s proposed R38 million loan
Dear Premier, Minister
Long term municipal borrowing is tightly regulated in the MFMA. The seminal requirements are transparency and public participation, and a requirement that any proceeds are only used for capital investment. It is, however, encouraged among creditworthy municipalities as it is an efficient and (inter-generationally) fair mechanism to finance infrastructure over its operational lifespan. The public participation requirements are critical, as borrowing does commit the residents of a municipality over the long term.
Although we have no authority to approve or disallow specific borrowings, the municipality is required to advise the PT of its intention to borrow and provide us with an opportunity to comment as well. We have received the notification, undertaken a detailed assessment and responded to the municipality. They will be required to table this in council before a decision is taken. The PT response is attached, which does not detect any problems with procedural compliance at this stage. It does, however, raise concerns about the financial health of the municipality: despite it evidently having the capacity to borrow, it does have liquidity constraints and may face quite tough pricing and tenor requirements from lenders. All factors considered, the PT has advised the municipality to reconsider this loan and at least reduce its size. We are in ongoing contact with the municipality on the matter and understand the CFO is also preparing a detailed response to the concerned ratepayers.
It is encouraging to see robust public debate in this municipality, which is exactly what the MFMA intended and can only strengthen the final decision of the council. It is ultimately a difficult trade off between waiting for improvements in financial health and market conditions, and investing in infrastructure now.
I hope this assistsRegards