ANALYSIS: How leaks, billing write‑offs and Excel accounting pushed Nelson Mandela Bay to the brink
Based purely on cash flow, the Nelson Mandela Bay Municipality is on the brink of structural insolvency, but it is not yet legally defunct because it is currently being kept operational by national grant lifelines.
Nelson Mandela Bay Municipality is teetering on the brink of financial ruin, highlighted by a recent warning from the National Treasury. The city's budgeting is based on questionable assumptions, with large portions of service revenue expected to be uncollectible. For example, water billing collection is only 30.9% and waste management is 50.9%. However, the municipality isn't legally defunct due to national grant lifelines.
The National Treasury's UDFG (Urban Development Financing Grant) has provided R2.38-billion to the city over three years. This grant allows the city to use the money for operating costs, repairs, maintenance, and hiring consultants. Despite this, the city has low formal long-term bank loans, resulting in a high debt coverage ratio of 56.35 times.
The five delinquent departments include electricity, water services, waste management, human settlements, and budget and treasury. Electricity faces a R1.48-billion black hole due to theft and illegal connections. Water services are sold below cost, causing leaks and theft. Waste management operates at a -21% deficit with unaddressed landfill issues. Human settlements has failed to address the housing crisis, while the budget and treasury department uses outdated Excel spreadsheets for financial management.
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