GGM and Lim345 will soon go broke

Greater Giyani Municipality (GGM) headquarters.  Photo supplied. 

By Angie Nkuna

GIYANI- According to the National Treasury executive it is only a matter of time before some of the municipalities are not able to pay salaries.

This has emerged after the Greater Giyani Municipality (GGM) has invested R158m of its R302m operating revenue in VBS.

Meanwhile, the newly established Lim 345 Municipality, had invested R122m of its R344m operating revenue in VBS.

At least up to 15 municipalities across the country could collapse because they are not likely to recover their R1.5bn investments at VBS Mutual Bank.

Their exposure to VBS was “too large compared to their operating revenue”, according to a Treasury document sent to the affected municipalities last week.

The SA Reserve Bank (Sarb) placed VBS under administration in March, following a liquidity crisis. VBS’s main source of cash was illegal short-term municipal deposits which it used to fund long-term loans to clients.

Another Treasury executive said this money was part of municipalities’ annual budgets and not extra money that the councils could function without.

“Unfortunately, they have lost all that money.

An executive member of the SA Local Government Association said it was almost a foregone conclusion that some of these municipalities will crash.

“We are losing sleep over the issue. The money was strictly for operational issues, not reckless investments,” said the official.