Concerns over eThekwini Municipality's financial stability grow amid low cash coverage

The financial state of the eThekwini Municipality is under scrutiny amid concerns that the municipality does not have adequate funds for its expenses.

ActionSA said that the city's financial state was laid bare during a meeting of the finance portfolio committee on Wednesday.

The party's councillor Zwakele Mncwango said that the financial ratios presented to the committee paint a worrying picture of a municipality under serious cash and operational strain.

“eThekwini currently has a Cash/Cost coverage ratio of approximately 0.5, meaning the municipality has less than one month of cash available to cover its operating expenses. This level of cash coverage is extremely risky and leaves the city vulnerable to service delivery disruptions and financial shocks,” he said.

According to a document shared by ActionSA with the media, in terms of the Cash/Cost coverage ratio (excluding unspent conditional grants) is 0.5 months which is 14 days or 0.7 months if including unspent grants, which is 20 days.

The benchmark the document states is 1-3 months.

Mncwango added that while the Current ratio of 1.48 suggests that the municipality is able to meet its short-term obligations on paper, ActionSA cautioned that this is largely driven by non-cash items such as outstanding debtors and grants receivable.

“This does not reflect real cash availability and masks the severity of the municipality’s liquidity crisis,"  he stated. 

Mncwango added that ActionSA will continue to push for the immediate stabilisation of cash flow and stricter cash management, the halting of unnecessary borrowing until operational and governance failures are addressed, and an aggressive reduction of water losses and protection of municipal revenue.

“The municipality must also urgently improve revenue collection, particularly from major defaulters and state departments, just as the City of Tshwane is doing. The people of eThekwini cannot afford decisions that mortgage the future of the city while fundamental problems remain unresolved,” said Mncwango.

DA councillor Thabani Ndlovu, who was part of the finance committee meeting, also expressed concerns about the financial state of the municipality.

“The Democratic Alliance in eThekwini is deeply concerned about the municipality’s worsening financial position and the continued failure of the Finance Department and political leadership to deliver on repeated commitments to restore fiscal discipline. Despite alarming reports of more than R400 million in irregular expenditure, there is no evidence of meaningful improvement.”

However the eThekwini Municipality pushed back against concerns that it is not in good financial health. 

“As a city, we wish to assure residents that the municipality’s financial health remains sound. At the beginning of the financial year, the City adopted a fully funded budget, and this budget was assessed by the National Treasury and found to be credible, funded, relevant, and sustainable,” the municipality's statement said.

The City said the approved budget was based on an assumed collection rate of between 93% and 95% and the current collection rate stands at 93%, confirming that the municipality remains in a stable financial position. 

“Once again, we wish to assure the public that the municipality remains in a sound financial position, with revenue exceeding expenditure," the statement concluded. 

Meanwhile the Durban Pension Fund has decided to grant the city a temporary break from employer contributions. The municipality is expected to save at least R24 million in 2026.

Deputy chairperson for the Durban Pension Fund, Councillor Ntando Khuzwayo, explained that the fund has performed exceptionally well through global investments, and this strong performance has resulted in a surplus within the employer contribution reserve account.

As a result, he said the fund’s board took a decision in December to grant the municipality a payment holiday.

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