By Johan Pretorius
Chairman of Ugu’s External Audit Comittee, Paul Preston, sketched a bleak picture of Ugu’s finances when he addressed the monthly council meeting last week. He said the income for the period of July 2018 to March 2019 was in the order of R379-million, and expenditure R882-million.. This left a shortfall of R427-million for July 2018 to March 2019. There was an average monthly income shortfall of about R100-million. Salaries were R24.5-million per month. This meant that the equitable share at the end of March had to be used to settle prior, previous debt before it could be used for expenses during the following 4 month period.
Mr. Preston addressed a wide range of issues, and expressed concerns regarding the Ugu South Coast Development Agency. He pointed out that the USCDA was a municipal entity and a private company registered in terms of the Companies Act, which was completely controlled by Ugu, the parent municipality, which held all its shares. This was as a result of a directive from National Government to take over the agency. It was not Ugu’s decision to create the agency, and it was transferred to Ugu from the then Hibiscus Coast Municipality at great cost. Mr. Preston mentioned reasons why the audit function at the entity was being materially impaired. For example, certain creditors had not been paid and no reasons had been given until the Audit Committee called for reports. The income structure of the entity meant that local municipalities were expected to pay funding from their own equitable share ( which was their money for service delivery) to support the agency. The Audit Committee was confronted by the situation where the failure to make payment by the local municipalities was causing a financial collapse within the entity. At the same time the local municipalities might claim that nothing had been done on their behalf for years and years, which was the truth, for some local municipalities such as Umuziwabantu. On the other hand, the entity claimed it could not do anything because it was not receiving any funding.
Mr. Preston said from the Audit Committee’s point of view, there was almost no material progress within the USCDA. “To be candid, there was little or no evidence of any development which had been initiated by the agency over its long period of existence,” he said. “Yet it costs millions of rands a year without any real work product at all. It has borrowed R4-million from Ugu South Coast Tourism, adversely affecting this entity’s balance sheet, with little prospect of repayment of capital or interest due at present,” Mr Preston stated. Over the years the local and Ugu municipalities pumped millions of rands into the USCDA. To the best knowledge of the Audit Committee, few, if any, permanent jobs had been created by the USCDA other than for its own employees and Board Members. At the time of reporting there was not one current project receiving on-going expenditure with the entity, with a job creating outcome. It paid out over R56 000 per month in rent alone.
“Without wishing to seem cynical,” Mr. Preston said, “the USCDA exists to pay rent, its overheads, salaries, its board and audit fees. About two years ago the Directors’ fees amounted to an excess of R900.000 per annum, and director’s fees are budgeted over R800.000 for this year, and of course, its audit fees to the Auditor General and Audit committee.” It therefore made sense to rationalise the duplication of overhead costs such as rentals, telephones , internet, payment of boards and staff. Ugu South Coast Tourism and the USCDA had a parallel existence. Ugu South Coast Tourism had a very good CEO who could certainly manage both agencies. Another aspect which made the USCDA a cause for concern was that Ugu had its own Local Economic Development Department, which meant that it was already employing people to initiate and support local economic development. This entity was a further duplication in services, in addition to the other wasteful expenditure.
Mayor Mondli Chiliza did not agree with Mr.Preston, and said the USCDA had a specific function to fulfill, and instead of changing the status quo, despite the entity’s history, everything possible should be done to make it work and to ensure that it fulfilled its mandate, which was to economically develop the area and create job opportunities.