Thulamela financials show that the beast is getting fatter

By Anton van Zyl

Despite several commitments over the past few years that the Thulamela Municipality will become “leaner” and trim down on its high salary bill, the opposite seems to be the case. The municipality spends about half of its income on paying its workers and councillors.

In a notice placed in the Limpopo Mirror last month, the Thulamela Municipality invites members of the public to scrutinise its 2021/22 draft annual report. The document can be obtained from the municipality’s offices, but the notice states that it can also be downloaded from its website. After trying hard to find it on the website, we gave up and reverted to the latest audited annual financial statement (AFS), a document that is publicly available.

The latest AFS reveals some interesting details about the municipality’s activities and gives a good indication of what the administrators are struggling to control, while also painting a picture of a municipality that is reasonably well run, with a healthy bank balance. In fact, the municipality ended the year with almost one billion rand in cash and cash equivalents. R395,6 million was in the bank, while R592,8 million was in short-term deposit and a money market account. The surplus for the year was R182,9 million.

A closer scrutiny of the financial report reveals that the municipality is highly dependent on government hand-outs and spends most of it on paying for staff, councillors and numerous contractors.

Where does the money come from?

Three quarters (75,01%) of the municipality’s income comes from government grants and subsidies. The Equitable Share Grant provided R495,78 million in 2021/22. This is described as an “unconditional grant” allocated to municipalities to enable it to provide basic services to indigent households. It needs to supplement the municipality’s own revenue-collection system.

The next big contributor was the Integrated National Electrification Programme, that added R23 million to the municipality’s coffers. This grant is meant to assist municipalities in addressing the electrification backlog. It should provide electricity infrastructure to permanently occupied residential dwellings. Thulamela Municipality, however, does not earn money from the reselling of electricity. Once a project is finished, it gets handed over to Eskom.

Three further grants, namely a Financial Management Grant (R1,65 million), an Expanded Public Works Management Grant (R6,07 million) and an Infrastructure Skills Development Grant (R5,5 million), took the total of operating grants received for the year to R532 million.

Thulamela also received two grants for capital projects. The Municipal Infrastructure Grant amounted to R111,17 million, while the Municipal Disaster Relief Grant added R8,99 million.

Property tax adds R91 million

Roughly 10% of the municipality’s income (R90,94 million) comes from the levying of property tax. Residential properties brought in R38,02 million, while business properties contributed R20,09 million. The tax on government properties was R32,83 million.

The next big “earner” for the municipality was refuse removal. This service brought in almost R26 million, which is slightly up from the previous year’s R24,6 million. Several other “smaller” items added to the municipality’s fiscus. Interest received from investments provided a very useful R27,84 million. Interest was also levied on outstanding accounts, and this brought in R35,94 million.

Thulamela Municipality also acts as an agent for the Department of Transport and earns money as it licenses and register vehicles. This service brought in R9,4 million in 2021/22, which is slightly down from the R9,8 million the year before.

The rendering of various services such as building plan fees, property transfer fees and demolition application fees added R2,71 million to the municipality’s coffers. Licenses and permits for traders brought in only R446 000. Fines, penalties and forfeits brought in a very worthy R9,13 million.

The somewhat controversial rental of facilities and equipment collected R3,29 million. Part of this income is derived from renting out the Thohoyandou Stadium. The municipality was criticised in recent weeks for the manner in which it seemingly exploits the local soccer teams. Instead of investing in sport, the municipality profits from the top teams. One of the teams, TTM, relocated to Bloemfontein and cited the excessive charges for using the stadium as the reason.

But are they all paying?

At the end of 2022, Thulamela Municipality embarked on an extensive campaign to clear the debt backlog of its customers. It tried to accommodate its debtors by offering up to 50% discount for residential households. For government institutions, it was willing to write off the interest accrued.

How successful the campaign was, is not known, but it seems to be moving in the right direction. In 2020/21, the total outstanding debt of exchange consumers (such as bills for refuse removal), after reconciliation, was R450,04 million. The bulk of that amount, R432,38 million, was debt of more than 121 days old. This was reduced to a total of R220,14 million in 2021/22, with R210,99 million in the 121-days-plus bracket.

The reason for the lower numbers, however, was because a large chunk of the outstanding debt had to be written off. The notes to the AFS state that R238,98 million was written off as bad debt in the 2021/22 year. The municipality hopes, however, to recover R145,25 million of the outstanding debt, which brings the total for debt impairment to R93,73 million.

The situation for non-exchange customers was more dire. According to the Department of Treasury’s definition, these are transactions where “the entity received value from another entity without directly giving approximately equal value in exchange.” One example is property tax, where a customer will pay the tax, but does not receive a direct benefit from such tax. Another example would be a traffic fine.

At the end of the financial year, the municipality was still owed R301,73 million.

Where did the money go?

The biggest slice of the municipality’s income went to staff and staff-related expenses. The direct salary bill was R297,91 million. The 81 councillors cost the taxpayers R30,67 million and the bill for outside contractors skyrocketed to R83,47 million. This meant that almost two-thirds of the municipality’s income was used to just pay workers, councillors or outside contractors.

Worth mentioning is that the outside contractors are not to be confused with companies doing work on specific service-delivery projects. These are in fact people contracted to assist the municipality’s staff. The biggest expense is for “maintenance of unspecified assets” and amounts to R21,61 million. The legal bill for the 2021/22 financial year was R16,92 million and security services cost R9,65 million. The cost of “Business and Advisory” consultants was R17,17 million, while “Infrastructure and Planning” consultants cost R6,02 million. An amount of R1,7 million was even paid for “employee wellness”.

The situation gets a lot worse when analysing several expense items listed under “general expenses”. The various Ward Committee members received R2,8 million in allowances, the Skills Development Levy cost R2,48 million and protective clothing R1,83 million. The cost of travelling (local) was R3,05 million and R1,47 million was spent on conferences. An almost unbelievable R4,3 million was spent on subscriptions and membership fees.

If the direct cost of staff, councillors and outside contractors is calculated, and the cost of the expenses directly related to such staff is taken into account, it means that more than two thirds of the municipality’s income gets swallowed up by the people working there.

A major increase for the mayor

Very interesting to note is that the salaries of the top officials did not increase in the 2021/22 year. The remuneration of the municipal manager even went down from a total of R1,55 million in 2020/21 to R1,53 million last year. The salaries of the other senior managers remained at around R1,3 million per year.

The executive mayor’s salary went up by an inflation-beating 13%, from R934 653 to R1,057 million. Strangely enough, the Chief Whip’s salary went from R711 198 in 2020/21 to R460 627. The Speaker’s salary also went down, from R755 895 to R515 992.

The remuneration of the remaining councillors remained much the same, which was about R31 000 per month.

The increases in salaries for 2021 was 6,12%, but the council budgeted for an 8,45% increase in 2022.

“The general trend is for salaries to increase faster than the increase in inflation. We used a salary escalation rate of 8,45% per annum in addition to the above-mentioned merit increases,” the AFS tries to explain.

The end result of the increases, however, was that Thulamela’s expenses on staff members and councillors went to more than double the accepted norms, which is between 25% and 27% of operating expenditure.

What has been achieved?

Not many capital projects seemed to get off the ground in 2021/22. The reason for this apparears to be the court judgment in the case of the Minister of Finance vs Afribusiness.

In the AFS is stated that the Preferential Procurement Regulations: 2017 were declared invalid and unconstitutional “and treasury issued an advice to all organs of the state to put all procurement processes on hold”.

The municipality, however, must have bought some equipment, seeing that additions were made to the asset register. In the 2022 reconciliation, it shows that R6,7 million was spent on plant and machinery. New motor vehicles were bought for just under R14 million and computer equipment set the municipality back about R3,3 million (total). Roads and stormwater infrastructure increased by R105,1 million (total for finished work and work in progress), while the work undertaken on electricity infrastructure cost the municipality R25,19 million.

The municipality spent R27,74 million to repair and maintain its property, plant machinery and equipment. Maintenance of buildings and facilities cost R2,1 million, while R21,61 million was spent for maintenance of “unspecified assets”.

Waiting for funds

The AFS indicates that various capital projects are on hold, waiting for more funding or for disputes to be settled.

The Dzwerani Bridge project is on hold, because the community apparently cannot agree “on where the municipality wants to build the bridge”. The upgrading of Makwarela Stadium, with a carrying value of R42,34 million, was also put on hold because of a design error. This, apparently, concerns the glass.

The installation of stormwater pipes and access roads at areas such as Shayandima, Tshilungoma, Thohoyandou Ext K, Lwamondo, Tshisaulu, Tshishushuru, Makumbani and Maniini was put on hold, awaiting funding.

The new office for the traffic department in Sibasa, estimated to cost R10,34 million, was put on hold, awaiting more funds. The plans to build a testing station at Tshaulu at an estimated cost of R1,87 million were also put on hold, awaiting funding.

Reason for concern?

The municipality did receive a reasonably favourable report from the auditor-general (AG). The AG did not give the municipality an unqualified clean bill of health, though, as she was unhappy with some aspects.

One of the issues pointed out by the AG was the R508,12 million listed as irrecoverable receivables. She also criticised the municipality for not achieving goals set in their reports. She highlighted the Tshilamba and Makwarela street rehabilitation programmes.

The AG also complained about the lack of clarity regarding the number of indigent households being accommodated by the municipality. The number of households having access to basic levels of solid-waste removal was also a concern raised. “I was unable to obtain sufficient appropriate audit evidence for the reported achievement of the target 60 034 households in the annual performance report, due to the lack of accurate and complete records,” she commented.

Some material misstatements were made in the original financial reports concerning infrastructure development and basic service delivery, which the AG asked to be corrected. “As management subsequently corrected only some of the misstatements, I raised material findings on the usefulness and reliability of the reported performance information,” she said. Members of the public still have until 8 March to comment on the municipality’s financial report.

Muntshe restores shoes to their former beauty

By Kaizer Nengovhela

Ntshengedzeni Munyai from Madombidzha, locally known as “Muntshe”, makes sure he never has to go to bed hungry. He is a shoemaker, working from his little workshop at Louis Trichardt’s taxi rank, where he specialises in restoring old shoes.

Thohoyandou’s own “kota” king wants to share his winning recipe with young people

By Elmon Tshikhudo

Mr Teddy Nemandivhe, an emerging young Thohoyandou businessman, is set on creating more opportunities for young people to enter the world of business. Nemandivhe (42), who is the founder of the Chillx restaurant in Thohoyandou P East that specialises in a unique type of kota, wants to register his restaurant as a franchise, with young people running the outlets.

A kota is a loaf of bread that is normally cut into four quarters, which is traditionally eaten with achar. This has grown into a very popular dish over the years, especially in African cultures. Founded in 2019, and with more than 23 000 followers on social media, the Chillx restaurant is set to bring a major revolution to the kota business. Nemandivhe said he was introduced to the kota while he was working in Cape Town and Soweto between 2005 and 2016. “Kota is the most affordable and popular foodstuff in the townships. In some parts, it is the only meal for the day for many families. Over a period, I observed closely how it was done, and when I came back home, I set up my small business and basically just upsized the kota to a mega meal by adding more ingredients. It became a phenomenal success. It is the first one around Thohoyandou that has a sit-in area. You can take a look around town, but you will never find something like this. We pride ourselves on being the only restaurant that attracts tourists who want to have a taste of township food and life, while listening to good music,” he said.

Nemandivhe said that his restaurant’s growing popularity was the reason why he had decided to register it as a franchise, so he could reach people throughout the country. “My aim is to spread this throughout the country. After registration, I will make sure that young people benefit and be the drivers of this initiative. I want to create as many opportunities as possible,” he said. But although he is very excited about these ideas, he admitted that he does not quite have the financial muscle to pull the venture off yet. “I am calling on all who are interested in this venture to come on board. We can create jobs for our people, and especially the youth,” he said.

Nemandivhe can be contacted on 084 848 8863.

For Muntshe, everything started 15 years ago when he taught himself to repair shoes. “I did not want to engage myself in criminal activities. I have seen many people destroy their future by getting themselves involved with crime, and they ended up spending years in jail. I work hard to earn my money honestly, and this gives me peace of mind every day.”

He is very proud of the fact that he does not overcharge his clients either. “Most of my clients come from faraway places such as Nzhelele, Elim and Sinthumule/ Kutama. I have quite a lot of regular clients who depend on me time and again. Every shoe that is brought to me has its own requirements. I carefully analyse it to figure out the best way to fix it while keeping the client’s budget in mind,” he said.

Muntshe has never done anything else and works alone.

He keeps himself motivated and focused, and this gives him the courage to work hard every day.

He has big dreams for the future, the biggest one being to own a large shoe-repair franchise in the province through which he will be able to offer many local people work.

He encourages young people to try and do something for themselves. “Times are tough and work is very scarce out there. It will not just fall into your lap. Use some imagination to get yourself off the ground. Work hard and be proud of what you do. Never be ashamed of yourself, and stay away from substance abuse,” he advised.

Ntshengedzeni Munyai, or “Mutshe” as he is known, specialises in restoring old shoes.