South Africa’s richest city bankrupt – Joburg mayor and finance MEC respond

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Gauteng’s financial troubles have sparked widespread concern, with both the provincial government and Johannesburg’s leadership urging prudent budget management to avert potential disaster.

Although fears of bankruptcy have been downplayed, the region faces significant challenges that demand immediate and sustained attention.

In September 2024, Gauteng MEC of Finance Lebogang Maile issued a sobering warning about the province’s financial state, highlighting the possibility of bankruptcy as early as June 2025 if fiscal discipline is not enforced.

At the heart of the crisis is the Department of Health, identified as a major contributor to Gauteng’s financial woes.

The department’s persistent non-compliance across several critical areas—including grant management, revenue management, procurement, and asset management—has created a substantial drain on the province’s resources.

These issues are further compounded by population growth, urbanisation, and migration, which exacerbate the strain on healthcare and education.

Maile acknowledged that the province’s financial outlook is dire, with Gauteng’s budget expected to shrink by R50 billion over the next five years.

The influx of 230,000 people annually—placing additional demands on schools, hospitals, and other essential services—has made the situation even more challenging.

He emphasised that while Gauteng’s R169 billion budget is substantial, it must be managed wisely to address these pressures effectively.

Speaking with SABC News, Maile sought to clarify that Gauteng is not on the brink of bankruptcy—despite his earlier warnings.

He stressed the importance of contextualising the province’s financial challenges, noting that while insolvency is not imminent, urgent measures are required to ensure fiscal sustainability.

Proposed strategies include improving revenue collection, exploring new investments, and enhancing asset management to bolster the province’s financial position.

Maile’s frank acknowledgement of the crisis, coupled with his proposed solutions, has been met with cautious optimism.

However, the depth of the problems, particularly in the Department of Health, remains a significant hurdle.

Adding to the financial challenges are lingering issues such as the e-toll debt and broader national budget cuts, which have further strained provincial resources.

Maile warned that without decisive action, Gauteng could face a budget deficit of R6 billion by next year, underscoring the need for a clear understanding of the root causes of the crisis before implementing solutions.

Johannesburg’s mayor, Dada Morero, has also weighed in on the financial difficulties the city is facing.

Speaking to eNCA, he refuted claims that Johannesburg is bankrupt, emphasising that the city consistently meets its financial obligations, including paying salaries and medical aid contributions.

However, Morero acknowledged that the city’s expenditure currently exceeds its income, with a revenue collection rate that has dipped to 86%.

This imbalance, he noted, necessitates immediate action to stabilise the city’s finances. Departmental CFOs have been urged to reduce expenditure, and efforts to enhance revenue collection are underway.

While the city’s financial position is not ideal, Morero maintained that Johannesburg remains financially stable and is actively working to address its fiscal challenges.

Experts like Professor Mark Swilling of Stellenbosch University have pointed out that Gauteng’s financial troubles are not new but have reached a critical juncture.

Swilling highlighted entrenched corruption within the Department of Health, describing it as a deeply rooted issue linked to what he called a “syndicate.”

This corruption has had severe consequences, including the loss of whistle-blowers’ lives, and represents a form of state capture that continues to undermine the province’s financial stability.

Despite these challenges, Maile remains confident that Gauteng can avoid financial collapse.

He cited promising strategies for increasing revenue, such as improved tax collection and new investment initiatives, as potential lifelines for the province.

While these assurances have provided some relief, they come against a backdrop of escalating public concern.

Gauteng—home to South Africa’s economic hub—cannot afford a collapse in service delivery, making the stakes of the current financial crisis extraordinarily high.

Both Maile and Morero have called for disciplined and strategic budget management to navigate these turbulent times.

The financial challenges facing Gauteng and Johannesburg are steep, but with careful planning and decisive action, they believe a path to stability remains achievable.

However, restoring public trust and addressing systemic issues, particularly in the health sector, will be crucial for the long-term sustainability of the province and its municipalities.

Source: https://businesstech.co.za/news/government/806568/south-africas-richest-city-bankrupt-joburg-mayor-and-finance-mec-respond/



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