eThekwini loan debt: Parties sound alarm over finances

Councillors in the eThekwini Municipality have expressed grave concerns over the municipality’s financial state. The financial state of the eThekwini Municipality is raising sharp scrutiny amid allegations that the municipality is in a financially perilous position, raising concerns about its credit ratings. Councillors in the finance portfolio committee raised these concerns following the committee meeting on Wednesday.

They claimed that the situation is so serious that even the ratings agencies have expressed concerns. However, the municipality pushed back against any worries related to the rating agencies, asserting that it is among the most highly rated municipalities in the country. The report tabled in the meeting states that the municipality still has the capacity to borrow but issued a warning on the ratings outlook.

The report indicated that, regarding the debt-to-revenue ratio, the municipality is currently generating adequate operating revenue to meet its short-term and long-term obligations. Under the burden-to-asset ratio, which indicates the extent to which net assets are funded from loan funds, the reported ratio of 9.94% is below the benchmark, indicating that the municipality has sufficient capacity to take on more debt. However, the report noted that the capacity to take on debt should be viewed in line with the affordability of that debt.

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This requires that the municipality looks at the revenue collection rate and cash flow status before taking on more debt. Overall, the municipality’s liability management is rated Long Term AA-, Short Term A1+, and the Outlook is Negative per global credit rating. “The total loans outstanding amounted to R9 billion.

The municipality is extremely mindful that any long-term borrowing must be sustainable and affordable and in compliance with Chapter 6 of the MFMA and the municipality’s Borrowing Policy and Financial Strategy. These values are entrenched in the municipality’s Integrated Development Plan, and the Financial Strategy gives effect to these values,” said the report. IFP councillor Dr Jonathan Annipen said the finance committee meeting raised serious concerns.

“The situation is no longer merely concerning — it is a full-blown financial emergency that threatens to cripple the city’s ability to function, deliver basic services, and meet its constitutional obligations.” He added that he is deeply concerned by the financial warning signs reflected in the municipality’s own financial documentation, particularly the confirmation that while eThekwini retains a Long-Term AA- and Short-Term A1+ credit rating, its outlook remains negative. DA councillor Ngiphiwe Xulu, deputy whip in the finance committee, said the overall financial outlook of the municipality is seriously concerning. He stated that uncollected debt has ballooned by more than R1 billion per month over the past three months and now stands at over R47 billion.

“This is a clear indication that the municipality’s financial management is heading in the wrong direction. Non-revenue water losses continue to drain the municipality’s resources. eThekwini simply cannot afford to lose more than 55% of its water.

This is completely unsustainable, and the situation continues to deteriorate. Every drop of water lost through leaks, theft, and poor infrastructure management represents money that the municipality cannot recover and resources that residents are ultimately denied,” he said. Mayoral spokesperson Mluleki Mntungwa said the results by rating agencies are expected to be released at the end of July, and the municipality is confident that these are going to be positive given its financial strength and abilities.

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