R3.8 billion loan to save ‘broke’ Johannesburg fails … for now

The governing coalition in the City of Johannesburg has failed to secure sufficient council support to approve a R3.8 billion loan agreement with a German development bank.

On Thursday, the ANC and its partners failed to secure 136 votes from council, which could have enabled council to approve the loan.

On Wednesday, Johannesburg Mayor Dada Morero told residents in his State of the City Address that the loan was meant to enable City Power to carry out its functions. He insisted that the city was financially stable despite Eskom and the National Treasury indicating it was struggling.

Council speaker Margaret Arnolds said another council meeting will be convened to put the loan on the agenda and vote again.

A loan for residents?

Political parties such as the ANC believe this loan is important for City Power’s strategic vision. They described it as a loan for street lights and a loan for the residents of Johannesburg.

“This loan is affordable, it is compliant, and it is strategic. In fact, the German bank is giving a thumbs up to the City of Johannesburg, led by the executive mayor of the ANC-led government of local unity, to show that they are putting their weight behind the city because they believe in Johannesburg.

“People who believe in Joburg are the ones who support the loan. Those who do not believe in Johannesburg are not supporting the loan.

“We did indicate in our funding plan, and we have never hidden the fact, that loans are part and parcel of how the institution has to fund. Even the IDP [Integrated Development Plan] says that the municipal finance act [Municipal Finance Management Act] says we should bring the funding plan to council so that we indicate what it is, which is our intention,” she said.

Masuku further described the loan as being for the future of City Power.

“It is not about us… this loan is about the future of Johannesburg,” she said.

Who is benefiting from these loans?

ActionSA’s councillor Steven Nkonyeni said he is disturbed by the ANC coalition’s dependence on loans to fund service delivery in Johannesburg.

“This is a new norm we must not accept, Madam Speaker. A loan is a loan, whether we call it ring fenced or not. It is just money that will go into the city’s coffers and disappear because there is no accountability in the city.

“In fact, we should be getting reports on monies we have borrowed, how many loans we have, and total amount that have been repaid, total amounts that we owe and total interest payable,” he said.

He questioned how effective this loan would be, since the city had taken out loans before.

“The people of Johannesburg are paying more and receiving less, more blackouts, more potholes, more water outages, more unemployment and more hopelessness and who suffers the youngest people who have lost faith in government,” he said.

A collapsing City Power

While the DA did not vote in favour of the loan, the party’s Stephen Santana painted a picture of a crippled City Power in need of assistance.

“On any realistic assessment, City Power is in severe financial distress. City Power, operating in bulk purchase costs, exceed its revenue collections and is being subsidised by other revenue-generating entities and by property rates. The necessary reforms and turnaround strategies are being implemented too slowly.

“Madam Speaker, a municipality cannot borrow its way out of financial distress. Doing so simply increases debt servicing obligations and interest costs, ultimately placing further pressure on service,” he said.

EFF says Morero must tell the truth about Joburg finances

Meanwhile, the ANC’s coalition partner in Johannesburg, the EFF, also told the mayor that he is being unrealistic about the dire financial situation in the City of Johannesburg.

“The city is increasingly relying on the loans to fund critical infrastructure, while the executive mayor continues to speak as if the city is financially stable and everything is under control. It’s not like that at all. That is the contradiction the EFF is exposing today.

“A city that keeps turning to borrowing cannot pretend that its finances are healthy without explaining the long-term costs to residents.

“Every loan has consequences; it must be repaid with interest from future budgets. That means future money debt repayment, even with development loans, residents must be told the truth,” said the party’s Saseka Zitha.