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The City has stressed that its finances are stable and that revenue collection is up while billing accuracy has improved.
JOBURG’S finances are healthy, says the City, rebuffing claims that it is facing a liquidity crisis because it is not collecting enough revenue.
 Executive mayor Parks Tau tabled a R33-billion budget earlier this year“Joburg finances are stable. The City is committed to the continued improvement [of] its financial position,” said Kgamanyane Stan Maphologela, the spokesperson for the revenue and customer relations management department.
“The cash position of the City has improved significantly in the first quarter of the current financial year. This can be attributed to improved levels in the collection of revenue.”
Maphologela said revenue performance in that quarter had shown that the municipality had turned the tide. “The number of accurately billed customers has increased significantly.”
He was rejecting claims by the opposition that the City was facing a liquidity crisis because it was not collecting enough revenue. Joburg’s financial position was not subject to whims and its estimated revenue corresponded with planned expenditure, he added.
Its revenue collection “had responded to interventions made in billing and credit management. Back office re-establishment has also resulted in accelerated query resolution.”
Old debt
Joburg was making inroads in the collection of old debt, as indicated by the 102 percent collection level achieved in the first quarter of the year, from July to September.
Strategies were also in place to improve revenue performance, including “stratified customer base, robust credit control and prioritising the roll-out of smart meters”. “The improvement in the collection levels has positively impacted the cash management strategies of the City.”
Cash flow mismatches were a result of the natural timing differences between when cash was used and when operating inflows were received. “To manage the mismatches, general banking facilities or commercial paper are used after assessing affordability and pricing in the market. This practice is in line with the council-approved funding plan that takes into account the magnitude of the City’s budget.”
 Revenue collection is upIn the last fiscal year, commercial paper had proved to be more cost-effective and all commercial paper issued in the 2010/11 financial year was redeemed on time. In the previous financial year, commercial paper to the value of R2,7-billion was issued by September; in the current year, the City had only issued R401-million by 30 September, Maphologela explained.
“The City has never defaulted on any of its obligations and anticipates that going forward it will continue to ensure that all its obligations are met timeously in responding to service delivery requirements.”
He said the municipality would reduce borrowing levels in future. “Borrowing from the market will be limited to R1-billion compared to previous highs of over R2-billion.”
World Cup
There had been a number of significant events in the past three financial years which had had an impact on the City’s financial position, including preparations for the football World Cup in 2010 and the resulting stretch on the City’s finances to meet national delivery targets; the global recession and its impact on customer payment levels; and billing challenges associated with the teething problems in the migration to the new revenue software.
“The annual average collection rate at 30 June 2011 was 87 percent against a budgeted 93 percent. The combined effect of these factors has been a declined liquidity position. The City has always complied with Section 45 of the [Municipal Finance Management Act], which prescribes that any short-term debt issued needs to be repaid prior to the end of the financial year.”
Maphologela said the City’s financial position was affirmed by the latest credit ratings from the global ratings firm Fitch, which kept Joburg’s credit rating steady, signalling ongoing confidence in its ability to manage its finances.
“This affirms the confidence in the City’s ability to manage its finances. The City of Johannesburg has a Redemption Sinking Fund which was set up to redeem all bonds (long term) issued when they fall due. Contributions into this fund are up-to-date and therefore, bondholders’ investment in the City of Johannesburg is not at risk,” he said.
Fitch gave Johannesburg a long-term local currency rating of BBB+, a national long-term rating of AA-(zaf) and a national short-term rating of F1+ (zaf). It found the economic outlook to be stable.
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