The Citizen reports that the City of Tshwane on Tuesday afternoon announced that it will implement the bargaining council ruling made the previous day and pay – retrospectively – the 3.5% salary increase its staff was entitled to in 2021/22. This means the city must find at least R2 billion to foot the bill that is payable in the next six months, according to the ruling. Where that will come from is not clear.

This is a huge setback for the city, which has started making modest progress towards financial recovery, says Leon Claassen, managing executive at Ratings Afrika. Ratings Afrika annually analyses the audited financial statements of the larger municipalities in the country and publishes the Ratings Afrika Financial Stability Index. The index measures among other things the ability of a municipality to withstand shocks, including financial shocks. Tshwane has consistently performed poorly.

Claassen says the city’s financial statements for 2023/24 showed a liquidity deficit of R9.7 billion. It did record a R500 million operating profit, but that is not enough to fund the backdated salary increase now. “Tshwane is in a deep hole that it must dig themselves out of. “The outlook is dark, and I cannot see it improving soon,” says Claassen. “The city has no cash reserves and who will lend them money? Banks consider cash and cash reserves. It will impact the city’s whole financial situation. “The liquidity shortage will increase, and service delivery will remain poor.”

By Antoinette Slabbert

Ref: Moneyweb: Journalist