AMATHOLE District Municipality (ADM) has reported substantial progress in its financial recovery plan (FRP), with over 80% of planned activities now fully implemented. This recovery initiative resulted from a provincial government intervention invoking Section 139(5)(a) of the Constitution in January 2021 due to various challenges faced by the municipality.
In his report to the council, Executive Mayor Anele Ntsangani noted that these challenges included weaknesses in municipal controls, leading to unfavourable audit outcomes over the past three years, ranging from adverse to a disclaimer on audit opinions.
Ntsangani highlighted that the municipality operates with an unaffordable and inflated organogram, inclusive of non-strategic functions and personnel lacking appropriate skills. He also pointed out issues with poor planning, implementation, and execution of service delivery projects.
Ntsangani further mentioned that the municipality’s total operating revenue has decreased, with employee-related costs comprising 91% of the Equitable Share allocation. Regarding infrastructure provision, there is insufficient funding for maintenance and refurbishment.
The FRP is structured in three phases: the ‘rescue’ phase, followed by ‘stabilisation’, and concluding with ‘sustainability’. An overview of the implementation status revealed that 86% of planned activities were fully implemented, 11% are in progress, and only 3% have not been started, marking a 7% improvement.
Financial difficulties persist, such as the adoption of unfunded budgets for seven consecutive years, cash flow issues, and questionable data credibility, which resulted in a reported negative cash equivalent of -R290 million in August. Debt collection rates stand at a mere 20%, significantly below the national norm, leading to debtors reaching R1.71 billion in August. As of June 2024, irregular expenditure amounted to R892,263,818, unauthorised expenditure to R351,928,781, and fruitless and wasteful expenditure to R110,436,281, although these figures remain unaudited.
“The mandatory financial recovery plan adopts a strategic, focused approach that is both time-bound and comprehensive enough to adequately address the crisis’s underlying causes, as guided by the National Treasury MFRS Team. To achieve this objective, the plan presents a phased approach to recovery, distinguishing between short, medium, and long-term issues,” he stated.
