Opposition party councillors in eThekwini are fuming about the council's decision to acquire a R1.5 billion loan to finance key projects. Doctor Ngcobo/Independent Newspapers
Opposition party councillors in eThekwini are fuming about the council's decision to acquire a R1.5 billion loan to finance key projects, saying the loan will cost the municipality R1 million per day in interest.
The loan was factored into the City’s 2024-2025 budget. The City has also borrowed in previous years and maintains that it still has the capacity to continue borrowing.
The Metro said it currently owes R10 billion to financial institutions.
The repayment profile includes R1 billion in interest. The municipality has also previously said that it is generating adequate revenue to service its debt obligations, in addition to the interest earned on investments.
The report, tabled to council this week, provided councillors with a progress report on the sourcing of this loan.
While the report was intended to discuss the progress of acquiring this loan from financial institutions, as the request to take a loan was already approved by the council, opposition parties on Thursday continued to argue that taking out the additional loan was a financial mistake.
DA councillor Rory Macpherson said: “All that has been done here with this loan is to make the City’s problems the ratepayers’ problems, and that is not ‘defendable’. Collect the debt; it's the right thing to do. The solution is not just about collecting debt but also about increasing revenue where you can and reducing wasteful expenditure.”
He added that as part of building a larger revenue base, the City should encourage investors to invest in manufacturing in Durban. By promoting manufacturing, the City could create more employment opportunities.
Freedom Front Plus councillor Henricus Van Der Ryst expressed frustration about the matter.
“This situation makes me mad. Besides the fact that this will cost the municipality R1 million per day in interest alone for the next 15 years, this is in addition to the R1.5 billion we borrowed last year.
“We have R9 billion in the bank that we are not using. Why should we borrow at higher interest rates? The interest alone on this loan is a million rand a day that we are wasting. That doesn’t even include the R1 billion that we are going to borrow next year.”
A report on the matter detailed the progress, stating that it is noted that the municipality was in the process of issuing a request for proposals inviting financial institutions to submit proposals for providing debt for annuity long-term loan funding for the capital budget. This will be advertised in local newspapers and on the municipality's website.
“It is evident that the municipality is required to raise long-term debt of approximately R1.5 billion from external funding sources for the financial year 2024/2025 and then R1 billion for the 2025/2026 and 2026/2027 financial years,” said the report.
It said the municipality will utilise a combination of bilateral long-term loans from commercial banks and development finance institutions, as well as bonds through the Domestic Medium-Term Note Programme.
The split between these methods of funding will be determined based on the sentiments of the debt capital market and investors’ interests. A combination of these funding instrument in appropriate proportions will ensure that the planned R1.5 billion budget for borrowings is met accordingly, the report continued.
The ANC said “We have the right to borrow money, and we have followed all the rules. The National Treasury has given us permission to do this. The ANC has followed the process, and there is a need to borrow this money.”