Tshwane's R1 billion loan decision criticised amid budgetary issues

The multi-party coalition government in Tshwane has come under fire for its decision to secure a R1 billion loan from Absa to bolster its operational budget, just months after celebrating a fully-funded budget in July.

DA caucus leader Cilliers Brink has slammed the move, saying it contradicts a promise made by Member of the Mayoral Committee for Finance Eugene Modise during the 2025/2026 budget delivery. 

Modise assured that the new administration would not take out loans, citing sound city finances.

Brink said: "The setting aside of the cleansing levy by the High Court and refusal of leave to appeal leaves the city with a deficit of over R500 million." 

He pointed out that the report before the council requests approval for an R800 million short-term loan facility "on a budget that has subsequently been rendered unfunded".

The development follows a recent High Court ruling in Pretoria, which dismissed the municipality's bid to appeal a judgment that nullified the R194-per-month cleansing levy imposed on properties utilising private waste collectors. 

The court criticised the city's underlying motive, suggesting it aimed to unlawfully generate around R540 million annually.

Brink said the city needs a thorough review of its funding plan, as it is based on flawed assumptions and inadequate measures. 

"When the budget was approved at the end of July, the DA warned against the cleansing levy because its structure didn’t make it clear what part of it would go to the city’s cleansing services. And so, we now operate on a false premise of a funded budget," he said.

A council report, backed by 115 votes from the multi-party coalition government, stated that the short-term debt facilities would help the city meet its cash flow needs for the 2025/26 financial year. 

The city invoked Section 45 of the Local Government: Municipal Finance Management  (MFMA) Act 56 of 2003, enabling it to seek council approval for a short-term debt agreement with Absa. 

The deal involves securing a R1 billion facility, comprising an R800 million cash loan and a R200 million guarantee.

However, Lex Middelberg, a councillor from the Republican Conference of Tshwane, questioned the prudence of taking on debt that must be repaid from anticipated income within the financial year. 

He highlighted a concerning pattern where the city repays debt by neglecting to pay accruing creditors, leading to an ever-growing list of unpaid creditors.

ActionSA councillor Tshepiso Modiba argued that the short-term loan facility is a vital mechanism to enable the city to responsibly meet its operational and financial obligations throughout the financial year. 

"Section 45 of the MFMA provides for the incurring of the short-term debt for operational purposes within the financial year, provided it is repaid in the same financial period," he said.

Modise fired back at Brink's statement, asserting that the city's budget does not have a deficit. 

He also criticised the DA, saying they used to apply for loans when they were in government and faced unfunded budgets. 

"We want to proceed with the facility because we want to be commercially viable as the city," he said.

rapula.moatshe@inl.co.za