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Re-Reports In The Media Relative To The Ethekwini Municipality’s Annual Report
Statement by City Manager Dr Michael Sutcliffe (Accounting Officer) and CFO, Mr Krish Kumar.
Hereunder follows the facts around the issues raised in the media over the past week:-
 
Audit Report
The report was presented to the Council by Mr Hermann Van Zyl from the Office of the Auditor-General of South Africa. It was a very balanced report. The report indicated that there were concerns regarding compliance issues and Supply Chain Management processes.  However, as regards the City’s financial performance he indicated that the City was performing exceptionally well. In this regard, it is a well-known fact that the Ethekwini Municipality is the only municipality in South Africa that has never received a qualified audit report.
 
Credit Rating
The City’s credit rating remains the highest in the municipal sector. The credit rating is undertaken by an independent rating agency and looks at issues such as the City’s overall financial performance, management, political leadership, and sustainability in terms of its borrowings, debtors and capital expenditure. The credit rating has placed the City in a strong position to access loans at very competitive rates which are below the market and what our peers can attract. 
 
Irregular Expenditure 
In the 2009/2010 audit the Auditor-General placed specific emphasis on irregular expenditure. This must be put into perspective as the irregular expenditure concerned was not tantamount to wasteful expenditure, nor was it fraudulent. Instead it related to expenditure where due process was not always followed to the letter as laid down in law. In this regard, it must be noted that the City was already aware of several instances of such irregular expenditure and we appreciate the Auditor-General’s concerns. However, it must be noted that most of such expenditure relate to housing which is a complex function as it straddles all three spheres of government. In many cases whilst the Municipality had authority from Province to go ahead with a project, there were delays in the draw-down of funds. Accordingly, due to the pressure from communities to deliver, expenditure was incurred before the necessary funds could be received from Province. Notwithstanding this, the City will be regularising all such expenditure, and where there is any evidence of fraudulent activity, the appropriate action will be taken.
 
SCM Irregularities 
The Auditor-General also put a strong focus on this issue in his 2009/2010 audit. The City welcomes this. However, it must be noted that the SCM framework is very tight and the process of approval of tenders could take up to 6 months. This undoubtedly negatively impacts on service delivery. Accordingly, the City has looked at creative ways to expedite service delivery. In this regard the City set up panels of suppliers in terms of due process from which the Head could appoint a supplier without going out to tender each time. Given that the AG feels that we should not do so, even though it will slow down service delivery, we have now stopped this practice with immediate effect.    
 
Quantum of Expenditure
It should be noted that the irregular and non-compliant expenditure totaled just R532 million which is only 3% of the City’s expenditure of R17.2 billion for 2009/2010. Notwithstanding this, and as mentioned earlier, the City will be taking the necessary action to regularise such expenditure.
Non-disclosure of Business Interests
The issue of individuals in the service of the State that have not declared their business interests is being investigated. Appropriate disciplinary action will be instituted against individuals that fail to comply. 

Service Delivery & Economic Development
The following are noteworthy as per the 2009/2010 annual report in terms of service delivery and economic development:-
o Conferences and exhibitions created over 8 000 permanent and casual jobs.
o The SA Tourism Indaba had a socio-economic impact of R250 million.
o Other conferences at the ICC had a direct economic impact of R1 billion with about 23 000 foreign attendees.
o There were about 10.4 million foreign visitors to Durban, excluding the world cup.
o 81% of households have water available, 75% have access to sanitation, and 68% have electricity connections.
o Delivered more than 145 000 houses over the past decade. In 2009/2010 16 000 new units were built.
o  225km of new roads, 320km of pavements, 222km of gravel to black-top roads, and 33 pedestrian bridges have been built over the past 5 years.
o R5.6 billion was spent on capital investment which is the highest in the country. There was a 100% spend.
o Operates a food security programme with 18 soup kitchens.
o Operate 90 libraries with 2.8 million books and 307 855 members.
o Have 102 fixed clinics. 

City’s Finances
Concerns regarding the City’s finances are misplaced and unfounded. The City’s finances are in a healthy state with presently about R2.15 billion cash-on-hand which equates to some 53 days cash-on-hand. However, whilst this is very good, we are targeting 60 days cash-on-hand. Further, our collection rate is still over 96% and last year National Treasury reported that the Ethekwini Municipality had the highest collection rate in the country. The City’s debtors are stringently managed and our billing system is stable and accurate. In addition, there is a 100% verification of all payments undertaken.
 
Borrowings
All borrowings are approved by National Treasury. Considering the service delivery backlog the City has inherited, borrowing is imperative. Further, it must be noted that the City’s gearing ratio is within the National Treasury guidelines.  
 
Independent Assessments & Oversight
Firstly, there is independent oversight exercised by the Risk & Audit Committee. In addition, to the Auditor-General, we have an Internal Audit Unit. Moreover, we have an Internal Control Department that looks at 100% compliance with payments, and now SCM too.
Apart from the various accolades and awards the Municipality has won over the past few years, Municipal IQ has independently rated the Municipality the best-performing municipality in the country. National Treasury, Municipal IQ and the credit rating agency have issued favourable reports regarding the City’s experienced and stable management team, strong political leadership, and the confidence that this brings to the sector. 
 
Conclusion
Consumers and ratepayers should be rest assured of the City’s full compliance with regard to expenditure and income. Going forward, the City aims to achieve a clean audit report with no issues contained therein. Finally, it must be reiterated that all expenditure will be regularised. 
Issued by the eThekwini Municipality’s Communications Unit. For more information contact Municipal Spokesperson Thabo Mofokeng on 031 311 4820 or 0827317456 or e-mail mofokengthabo@durban.gov.za
 
 
 
 
 
WEATHER

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