DA raises red flag on municipal financial mismanagement in Limpopo

Limpopo

The Democratic Alliance (DA) in Limpopo states that they will be writing to MEC of Treasury in the province, Kgabo Mahoai, calling for action to be taken against municipalities for poor creditor and debtor management and an investigation into municipalities that are failing to comply with Section 71 of the Municipal Financial Management Act (MFMA).

The party says they are concern that the Treasury’s creditor age analysis indicate that municipalities are not paying suppliers within the 30 days period as instructed per Treasury Instruction Note 34 and MFMA circular note 49.

Jacques Smalle, DA Spokesperson for Provincial Treasury in Limpopo, said only 16% or R316 million is due to creditors under 0 to 30 days, while 75% or R1, 454 billion is debt over 90 days.

“Municipality’s non compliance and failure to pay creditors timeously negatively impacts the viability of small and medium enterprises, increases municipality’s financial distress, limits economic development and growth and causes job losses,” he said.

Smalle added that municipalities in the province struggle to collect money from debtors and this offers a negative outlook on the viability of the municipalities.

“The debtors’ book for municipalities in the province indicates that R14, 6 billion or 91% of the amount is over 90 days and therefore unlikely to be collectable. Mopani District is the largest contributor accounting for 33% or R4, 946 billion, with Sekhukhune District being the lowest accounting for 10% or R1, 504 billion,” he said.

According to Smalle, poor or non-compliance with reporting requirements by municipalities seems to be an ongoing challenge that the Provincial Treasury must address.

He stated that Section 71 of the MFMA requires all municipalities to submit monthly budget statements to the Provincial Treasury while 71(7) of the MFMA, requires the Provincial Treasury to make a consolidated statement on the state of municipalities budgets per municipality and municipal entity public at the end of the quarter.

“The section 71 consolidated report submitted to the Limpopo Legislature in June 2024 indicates that 3 municipalities Vhembe, Mogalakwena and Thabazimbi did not submit their debtor’s strings for the period, five municipalities Molemole, Vhembe, Mogalakwena, Thabazimbi and Waterberg did not submit their household debtors for the period. Furthermore, five municipalities Greater Giyani, Ephraim Mogale, Fetakgomo-Tubatse, Thabazimbi and Waterberg, did not report amounts owed to creditor,” Smalle informed.

He emphasized that incorrect and incomplete information from municipalities when reporting also needs to be addressed urgently by the Provincial Treasury.

“The Provincial Treasury must urgently address the poor debtor and creditor management and investigate the non-compliant reporting by municipalities. These reports allow for early detection of problems in a municipality’s financial health and allow for monitoring, support and timely intervention if absolutely necessary for municipalities requiring assistance,” he said.

Smalle said proper management of creditors and debtors by municipalities is crucial for financial health and the DA is committed to ensuring accurate financial reporting that promotes transparency and good financial management.