EFF, DA ‘block’ loans

POLOKWANE – Councillors from the EFF and the DA suggested during the Polokwane Special Council meeting that the municipality should use the money from investment policies to do the repairs rather than engaging in a long term loan.

The municipality applied for a loan of R440 million from two financial institutions: R235 million from the Development Bank of Southern Africa (DBSA) and R205 million from Standard Bank Limited.

The money will be used to replace the aging water infrastructure in the Central Business District (CBD), Seshego and Annadale.

Polokwane Mayor, Thembi Nkadimeng said the suggestion was not viable as the municipality’s investments are not enough to cover all the costs relating to upgrading the infrastructure.

“We cannot take all our money to complete one project and not think about the future which is why we made our plea public, asking for funders.

“We even advertised for companies who are willing to assist the municipality to come forward.

“Nothing with regard to the loans has been set in stone and we are still looking for banks that can offer us lower interest rates,” she explained.

She added they previously agreed as a council on getting a long term loan and that they agreed on fixing the aging water infrastructure using the Public-Private Partnership (PPP) method.

The municipality, Nkadimeng added, is running a fair bid in terms of a possible solution and they are open to any company that is willing to help.

The EFF outlined that there already is R55 million allocated to the replacement of asbestos (AC) pipes in the city, adding there was thus no need to borrow money if the project of replacing the pipes was already in progress.

To date the municipality has spent around R21 million on the project which brings the expenditure percentage to 38,59% of the R55 million budget allocated.

The municipality initially intended to borrow R470 million but the National Treasury said should the municipality borrow the amount such expenditure will be considered to be unauthorised according to Section 15 of the Municipal Finance Management Act (MFMA), which requires the municipality to incur expenditure only in terms of an approved budget.

The City of Polokwane responded: The difference of the two amounts is as a result of a timing difference.

At a conclusion of the 2016/17 budget, the city was only working on the preliminary figures from the preliminary design, however the figure which was later submitted for consideration was based on the full design.

The city has since the meeting adjusted its request to R440 million in line with Section 15 of MFMA.

With regard to the loan, Treasury outlined that the 10,91% per annum fixed rate quoted by Standard Bank for R235 million is considered expensive.

The 2,594% fixed margin spread is 120 basis points above the historic average fixed margin rate of 1,39% derived from previous loans.

The fixed rate of 10,99% per annum, quoted by DBSA for the initial requested amount of R235 million is also considered expensive as the fixed margin spread of 2,674% is 129 basis points above the historic average fixed margin rate of 1,39%.

As such, Treasury urged the municipality to re-negotiate the interest rate with the two institutions.

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  AUTHOR
Endy Senyatsi
Journalist

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