News Column

Finance MEC steps in to stop R20m loan

August 22, 2014

THE WESTERN Cape government has stepped in to stop the troubled Cederberg municipality from taking out a R20 million long-term loan to finance road, sewage and electricity network upgrades.

The Cederberg municipality - which includes the West Coast towns of Citrusdal, Clanwilliam, Graafwater and Lamberts Bay - last month posted a general notice on its website announcing it was considering taking out the loan to finance capital projects.

The notice, posted on July 29 under the name of municipal manager Ian Kenned, says the municipality intends to finance five capital projects.

These include upgrading roads at a cost of R780 000; upgrading the sewerage networks for R550 000; replacing equipment and meters for R670 000; getting specialised/engineering vehicles and plant for R3m and upgrading the electrical network for Clanwilliam for R15m.

The loan is to be repaid over a maximum of 10 years at an estimated interest rate of 9.75 percent, with an estimated annual repayment of R2.3m.

The municipality asked for written comments to be submitted by August 14 ahead of yesterday's council meeting to decide whether to take out the loan or not. But the notice was brought to the attention of Finance MEC Ivan Meyer, who immediately intervened.

Meyer yesterday wrote to the municipality saying considering such a loan was not only a violation of Municipal Finance Management Act, but also threatened the municipality's financial sustainability.

He said that under the act a municipality could incur long-term debt only if the municipality accounting officer had issued a notice at least 21 days before the relevant council meeting setting out the details of the proposed loan and asking for comment from the public, the national Treasury and the provincial treasury.

Meyer said he had no record of the municipality asking for comment from either the province or the National Treasury.

Meyer said given the seriousness of the matter, he had written to the municipality asking it to halt the process of seeking approval for the loan before all the legislative processes had been finalised.

Yesterday, after the Cederberg council meeting, an angry mayor Lorna Scheepers ripped into the MEC, saying his "actions purportedly under the guise of support to the municipality are not appreciated".

Scheepers said the MECs letter, founded on alleged non-compliance with the requirements of the MFMA, was entirely misplaced.

"It is only the 'in principle decision' that has been served before the council and all relevant statutory requirements will indeed be complied with."

Cape Argus

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Source: Cape Argus (South Africa)

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