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TMMI - Availability of Annual Financial Statements
ETHEKWINI METROPOLITAN MUNICIPALITY
JSE alpha code: TMMI
("EThekwini", "eThekwini" or the "Municipality")
AVAILABILITY OF ANNUAL FINANCIAL STATEMENTS
EThekwini hereby advises that it has publicly released its audited Annual Financial Statements for
the year ended 30 June 2024 ("AFS"). The auditors of eThekwini, Auditor-General South Africa,
have issued an unqualified audit report relating to the AFS.
The AFS contain various restatements for the year ended 30 June 2023 ("Prior Period") relating
to:
1. Debtors' balances relating to water and sanitation services were adjusted to address the issue
of incorrect billing, whereby customers with properties valued at amounts greater than
R250,000 were receiving a 6KL rebate which they did not qualify for in terms of the
promulgated tariff.
Rates adjustments, including deferred rates as well as changes stemming from re-valuations
backdated to previous financial years. Incorrect electricity disconnection charges were also
reversed.
2. The adjustments include the recognition of liabilities in relation to the invoices that were
received late and not accrued in the prior year. Balances relating to some retentions, deposits,
trade and other payables were derecognized where, through assessment, it was confirmed that
the municipality no longer has an obligation to pay them. This was due to the factors such as
expiry of debt through prescription and transactions incorrectly recognised in the previous
years.
3. Cost adjustments include capitalisation of assets received or completed in prior periods but not
accounted for and the derecognition of assets where there are no expected future economic
benefits. Depreciation adjustments due to changes in useful lives and prior year capitalisation
of projects.
4. Cost adjustments include the capitalisation capacity rights to receive bulk electricity from
Eskom at specific supply points (refer to note 54: Enhancements to accounting policies).
Amortization adjustments relate to the extension of useful lives of various intangible assets not
adjusted in the previous periods.
5. Adjustments include accruals previously not accounted for, reduction in the prepayment
balance as a result of finalization of land transfers, derecognition of other debtors incorrectly
recorded in the prior year and reclassification of DOHS debtors. Further details on the
reclassification of DOHS debtors are contained in note 58: Re-classification of expenditure,
assets and liabilities.
6. The derecognition of receivables balance relates to the students who could not get job
placements after completing their studies due to unavailability of posts. In the prior years, the
student contracts were terminated. Thus, relieving them from any obligation in relation to the
amounts paid by the municipality to fund their studies.
7. VAT portions relating to prior year adjustments.
8. Adjustment for the recognition of an additional surplus amount included in the revised
management accounts of the Effingham Development Joint Venture.
9. Cost and depreciation adjustments relating to prior periods.
10. The prior year income recognition includes the donation received from the trust, which was
incorrectly recognised as a liability.
11. The adjustment includes the correction of buffer stock balance for items that were already
utilised but still held as inventory, and the electricity meters that were not recorded as part of
inventory in the prior year.
12. The adjustments above have resulted in restatement in the comparative cash flow.
Full details of the restatements are disclosed in note 45 of the 30 June 2024 AFS.
In addition, the audit report contains emphasis of matters in relation to:
Significant uncertainties
1. As disclosed in note 43 to the consolidated and separate financial statements, various legal
claims were lodged against the group. The ultimate outcome of these matters could not be
determined and no provision for any liability that may result was made in the consolidated and
separate financial statements.
Material debt impairments, losses and write-offs
2. As disclosed in note 5 to the consolidated and separate financial statements, the group
recognised a provision for debt impairments of R19,45 billion (2022-23: R13,64 billion) on
consumer debtors, as the recoverability of these amounts was doubtful.
3. As disclosed in note 51 to the consolidated and separate financial statements, material water
losses of 622 743 kl/day (2022-23: 659 478 kl/day) were incurred by the municipality, which
resulted in losses of R2 billion (2022-23: R2,03 billion). These losses arose mainly from ageing
and deteriorating infrastructure, uncontrolled, unplanned rapid rural expansion and illegal
connections.
4. As disclosed in note 51 to the consolidated and separate financial statements, material
electricity losses of 1,12 billion kilowatt hours (2022-23: 1,05 billion kilowatt hours) were
incurred by the municipality, which resulted in losses of R1,72 billion (2022-23: R1,37 billion).
These losses arose as a result of transmission and distribution losses as well as illegal
connections.
The AGSA audit opinion is not modified in respect of these matters.
The material irregularities identified are as follows
Expanded Public Works Programme payments made for expenses not incurred
1. Payments were made on the expanded public works programme (EPWP) to individuals that
did not qualify as beneficiaries. The expenditure controls and procedures designed and
implemented by the municipality in the EPWP payment processes were ineffective as they did
not detect and prevent payments made to fictitious beneficiaries, deceased beneficiaries and
beneficiaries employed in other state institutions that do not qualify as EPWP beneficiaries. In
addition, payments were also made to beneficiaries without sufficient supporting documents
or proof that tasks were performed. This was in non-compliance with section 65(2)(a) of the
MFMA.
2. The non-compliance has resulted in a material financial loss of R3,28 million by 31 October
2022 and is likely to result in further material financial losses of R2,34 million for the
eThekwini Municipality for payments made to beneficiaries employed in other state
institutions.
3. The accounting officer was notified of the material irregularity on 13 December 2022 and
invited to make a written submission on the actions taken and that will be taken to address the
matter.
4. The accounting officer commissioned multiple investigations into the matter, however, failed
to implement all the recommendations which were included in the report. During the prior and
current year audits, I identified similar issues on payments to invalid beneficiaries.
5. I notified the accounting officer on 29 November 2024 of the following recommendations,
which should be implemented by 30 June 2025:
• The non-compliance should be investigated to determine the root causes and if any
official might have committed an act of financial misconduct or an offence in terms of
Chapter 15 of the MFMA, for purposes of recovering the loss.
• The financial loss should be quantified and all person(s) liable for the losses should be
identified and appropriate action should commence to recover the financial loss where
possible. The recovery process should not be unduly delayed.
• Commence with the implementation of a system of expenditure control that also
addresses the root causes, as required by section 65(2)(a) of the MFMA, to prevent and
detect payments to ineligible beneficiaries. These should include verifying the
beneficiaries against the latest available databases, maintaining an audit trail of
verifications that were performed and cancellation of further payments to ineligible
beneficiaries.
• Disciplinary proceedings should commence, without undue delay, against all officials
who have allegedly committed an act of financial misconduct or an offence, as required
by section 62(1)(e) of the MFMA and the manner prescribed by the Municipal
Regulations on Financial Misconduct Procedures and Criminal Proceedings.
• If a senior manager of the municipality has allegedly committed an act of financial
misconduct, the accounting officer must report the allegation to the municipal council,
the Provincial Treasury and the National Treasury as required by Regulation 3(1) of the
Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings.
• If it appears that the municipality suffered the financial loss through criminal acts or
possible criminal acts or omission, this must be reported to the South African Police
Service, as required by section 32(6) of the MFMA.
Pollution of water resource not prevented – Northern wastewater treatment works
6. The municipality did not take reasonable measures at the Northern wastewater treatment works
(WWTW) to prevent pollution or degradation of the environment and water resources from
occurring, continuing or recurring, as required by section 28(1) of the National Environmental
Management Act 107 of 1998 (NEMA) and section 19(1) of the NWA. The WWTW was not
operational due to improper management of operational and mechanical equipment with
serious maintenance and repair needs (including vandalism and theft) as well as further
damages caused by the April 2022 floods. Raw untreated wastewater was also overflowing
and spilling at the pump stations that have not been operational for more than a year.
7. This has resulted in raw untreated wastewater and/or inadequately treated effluent being
disposed into the adjacent Umhlangaan and Umgeni rivers. The overflowing and spilling of
raw untreated wastewater and discharge of inadequate effluent into the Umhlangaan and
Umgeni rivers not only severely contaminates these water resources, but ultimately also the
related beaches. This has a devastating effect on the communities along and dependent on these
water resources as well as the ecosystems and recreational environments affected by it. It poses
a serious health risk to communities using these resources for domestic or recreational purposes
and adversely impacts the livelihoods of those dependent on tourism and sustenance fishing
affected by the frequent beach closures. The non-compliance is likely to cause substantial harm
to the communities exposed to and dependent on the contaminated water resources.
8. The accounting officer was notified of the material irregularity on 14 April 2023 and invited
to make a written submission on the actions taken and that will be taken to address the matter.
9. The accounting officer indicated on 26 June 2023 that an assessment of work required to repair
the WWTW and related pump stations had been completed with tender processes on the
appointment of a contractor being in progress. Follow up assessments performed by the audit
team showed E.coli levels excessively higher than the norms in January 2024. Despite some
actions, pollution was still ongoing and not addressed.
10. I determined that the accounting officer is not taking appropriate actions to resolve the material
irregularity. I am in the process of making a decision on further actions to be taken.
Pollution of water resource not prevented – Umbilo wastewater treatment works
11. The municipality did not take reasonable measures at the Umbilo WWTW to prevent pollution
or degradation of the environment and water resources from occurring, continuing or recurring,
as required by section 28(1) of NEMA and section 19(1) of NWA. The plant was severely
damaged by the April 2022 floods and further floods on the 27 June 2023. The East plant was
decommissioned with interim measures implemented to redirect the inflow. The West plant
was found to often exceed its (load) design capacity and was unable to properly treat and ensure
quality compliant disposals into the Umbilo River.
12. This has resulted in improperly treated effluent being discharged directly into Umbilo River
affecting the river quality and biodiversity as well as communities living next to or in close
proximity to the river. Other river use and recreational activities such as swimming, fishing,
canoeing, fauna and flora are negatively impacted by the poor wastewater quality and other
contaminants disposed into the river. The river supports multiple livelihoods from bed and
breakfast establishments to holiday parks as well as small-scale farming, therefore high levels
of E.coli poses a health risk for both the public and the environment. The non-compliance is
likely to cause substantial harm to the communities exposed to and dependent on the
contaminated water resources.
13. The accounting officer was notified of the material irregularity on 18 April 2024 and invited
to make a written submission on the actions taken and that will be taken to address the matter.
14. The accounting officer indicated on 18 June 2024 that an assessment of work required to repair
the WWTW had been completed with tender processes on the appointment of a contractor
being in progress. Follow up assessments performed by the audit team showed E.coli levels
excessively higher than the norms in March 2024. Despite some actions, pollution was still
ongoing and not addressed.
15. I determined that the accounting officer is not taking appropriate actions to resolve the material
irregularity. I am in the process of making a decision on further actions to be taken.
The AFS and Audit Report are included in the Annual Report of eThekwini are available on the
Municipality's website at
https://www.durban.gov.za/storage/Documents/Performance%20Monitoring%20and%20Evaluat
ion/Annual%20Reports/2023-24%20ANNUAL%20REPORT.pdf
and for inspection at 263 Dr Pixley Ka Seme Street, Durban, 4001.
30 January 2025
JSE Debt Sponsor
Absa Corporate and Investment Bank (a division of Absa Bank Limited)
Date: 30-01-2025 01:41:00
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