AMATHOLE District Municipality (ADM) owes the Department of Water and Sanitation (DWS) over R150 million and is expected to pay the department a staggering amount of close to R4 million a month to avoid legal action.
ADM Executive Mayor, Anele Ntsangani, reporting to the council on December 6, said the rural municipality had been experiencing financial constraints over a number of years.
“Due to the cash flow pressures, the debt owed to key service providers, such as the Department of Water and Sanitation (DWS), was not fully serviced. This resulted in the debt owed to this institution increasing to a substantial amount,” he said.
Ntsangani said the district authority intended to enter into a payment arrangement with DWS to settle the R155 647 557.97 debt.
The debt, Ntsangani said, is to be paid in monthly instalments of no more than 60 months.
“The monthly instalment of R1 701 954.97 must be paid on or before the fifth day of each preceding month until the capital sum has been paid in full. Interest will be frozen for the period of the settlement and will only be written off once the capital amount is paid in full.
“In addition to the monthly instalment, ADM must honour the current monthly invoices, which on average are around R2 200 000 per month. In total, ADM will be paying approximately R3 901 954.97 per month in accordance with the intended payment arrangement,” he said.
Ntsangani said the acknowledgement of the debt and repayment method had to be drafted and signed. The reduction of the debt will have a positive effect on the funding of the budget and mitigate the incurrence of fruitless and wasteful expenditure in the form of interest, he said.
“ADM is obligated to pay approximately R3 901 954.97 per month to DWS. Interest of R38 530 263.71 is to be written off by DWS. It is non-compliance with the Municipal Finance Management Act if invoices are not paid within 30 days, and there is the incurrence of interest on overdue amounts. In addition, the entities will take legal action against ADM for the outstanding debt,” Ntsangani said.
