STATEMENT – Current state of Affairs Greater Knysna

The Greater Knysna Business Chamber (GKBC) notes the developments in the Knysna Municipality (KM) over the last week.

As it stands, there is a Council deadlock on the way ahead. Currently, it cannot reach agreement on the proposed budget or on the fact that Section 135 (a) and (c) clauses of the Municipal Finance Management Act be invoked. These clauses would give an administrator executive powers for three months to allow the municipality to avoid, identify and resolve financial problems. The Development Bank of South Africa (DBSA) indicated that they are no longer willing to advance a loan of R71 million rand to the municipality until the correct governance structures are finalised: an Acting Municipal Manager or Municipal Manager appointed, and the position of the Chief Financial Officer confirmed.

GKBC stands by its support for the appointment of Dr Gratz to assume the administrative position as she has already proven her ability to manage Knysna’s affairs while in her post as Acting Municipal Manager. From the latest information the CFO has withdrawn his resignation and despite GKBC actively supporting the appointment of Dr Gratz to the position of administrator, her last working day in her current role is Thursday 11th June 2020. Immense and unrealistic pressure placed on Dr Gratz has left her in an untenable situation. If she is unwilling to stay on by withdrawing her resignation then we ask ALL Councillors to support the appointment of a competent suitably qualified external professional person with well-developed financial skills.

The budget serving before Council contains the R71 million loan which is now at risk and, should the funds not be advanced, the budget would need amending.

In terms of the legislation (Section 55 of the MFMA), the municipality must approve its annual budget by the first day of the budget year – 1st July 2020. If it has not approved the budget, then the matter must immediately be reported to the MEC for Local Government and can recommend provincial intervention in terms of Section 139 of the Constitution.

In terms of Section 139 of the Constitution and Section 136 of the MFMA, there is provision for the provincial government to step in when required. As it stands, indications are that the municipality will have a projected deficit of R41 million at the end of June 2020. For ratepayers to be adequately informed of the municipality’s exact financial position, we have requested the CFO urgently to provide GKBC with its Section 71 Report for May the moment it is available (which should be on the 10th of this month) as is required in terms of the MFMA.

We have also asked the Acting Municipal Manager to arrange for Knysna Municipality’s CFO to meet and engage with GKBC’s accounting committee to explain the budget and the current financial status of Knysna Municipality urgently so that GKBC can report fully to ratepayers. We will post progress on our web site, which is accessible to all ratepayers.

Should it become evident that the budget will not pass, or that there is a severe ongoing financial problem, then GKBC is committed to seeking the Provincial Government into making an appointment without delay. GKBC hopes that Dr Gratz will be the party who is appointed to assume that role. If for any reason she decides not to act as administrator, attempts should be made now to find an alternative suitably external qualified financially skilled and experienced person capable of filling that position.

GKBC calls for clarity on how the DBSA loan will be used. If KM has paid for capital expenditure in advance out of the operational allocations, this needs to be explained and identified. This loan needs to be approved for the 2021 budget; otherwise Knysna’s finances start with a R 70 million budget deficit.

As a civic organisation, GKBC wishes to ensure that the threats of funding withdrawal, the problematic financial constraints, as well as an investigation into how Knysna Municipality’s funds have been disbursed in the past, be responsibly and adequately addressed.

It is clear from the contents of the Council meetings since Dr Gratz assumed the position of Acting Municipal Manager, that problems were being addressed. Should the Council not be able to approve the budget, (a realistic budget based on actual revenue and borrowings) and ensure that Dr Gratz is allowed to continue her work with the necessary authority by 30th June 2020, then the GKBC proposes to seek the court’s assistance to ensure the timeous appointment of an administrator to protect the interests of ratepayers.

A similar intervention may in any event be needed even if the budget is passed should it become evident that Knysna Municipality has a severe ongoing financial problem. Greater Knysna Business Chamber will circulate this memo amongst its members and the ratepayers of Knysna as well as other civic organisations and would appreciate from them electronic responses by email.

In the response, please indicate whether GKBC has ratepayers support to:

  1. Call on all the Councillors to cooperate to address these problems and, if they do not do so, to
    2. Request Province in writing to assist

If those two requests fail then to:
3. Ask a court to intervene and appoint someone suitable for the position of administrator

Responses can be emailed to info@gkbc.co.za

GREATER KNYSNA BUSINESS CHAMBER

Directors:
Elmay Bouwer (Chair) | Martin Hansson (Vice) | Johnny Nkosi | Evelyn Pepler | Chris Schutte (Treasurer) Schalk van der Merwe | Albert Lombaard | Dr Andrew Brough | Richard Sohn| Hermann Kapp| | Clifford Elion Secretary: Maggie Zeelie (M.Inst.D) 

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