LOBAMBA – The Chief Executive Officer (CEO) of the Municipal Council of Manzini, Lungile Dlamini, has attributed the municipality’s worsening financial position to the costly construction of the Bosco Bridge and the withdrawal of government subventions.
Also, the CEO revealed how loss of clients who paid rentals significantly contributed.
The CEO made the remarks when the municipality appeared before the Public Accounts Committee (PAC) yesterday alongside other local authorities that fall under the Ministry of Housing and Urban Development.
Notably, some members of the PAC responded positively to the clarity given by the CEO and said it was positive that the municipality and the Ministry of Housing and Urban Development are working on remedying the situation.
The matter arose from findings by Auditor General Timothy Matsebula, who reported that the Municipal Council of Manzini recorded a deficit of E7 707 807 for the financial year ended March 31, 2024.
According to the Auditor General’s report, this represented a significant decline from the surplus of E1 503 409 recorded in the previous financial year ended 31 March 2023.
Matsebula attributed the deterioration in the municipality’s financial performance to expenditure increasing at a faster rate than revenue. He noted that finance costs alone rose by E3 619 926, or 133.44 per cent, from E2 259 609 in 2023 to E5 517 296 in 2024.
Appearing before the committee, Dlamini said the municipality’s financial challenges date back to an ambitious transformation programme launched in 2013 to address an infrastructure backlog estimated at E200 million.
She explained that the programme had initially been supported through a combination of funding sources, including government grants and World Bank financing.
However, the municipality’s financial model changed significantly after government stopped providing subventions in 2021 while several major infrastructure projects were still under way.
Dlamini further said the municipality’s financial position was compounded by the loss of rental income following the development of Manzini Mall and the transfer of several municipal properties, leaving the council increasingly dependent on rates to finance both service delivery and loan repayments.
“The Bosco Bridge has been the biggest burden. Ideally it should have been a government project because it benefits the entire country by improving movement of people and connecting businesses. The project cost about E90 million, including the roads, and would have been manageable had government subventions continued,” she said.
She told the committee that approximately E75 million had already been paid towards the bridge project, with only about E6 million still outstanding.
Dlamini said increasing finance costs were largely driven by borrowing undertaken to replace lost funding, while outstanding debts and creditors had further strained the municipality’s finances. She maintained that the city could not sustain its operations independently, particularly as the number of ratepayers was far lower than the number of people who use Manzini daily for business and other economic activities.
Supporting the CEO’s submission, the municipality’s Finance Director said operational costs had risen sharply from 2022 when the council began repaying contractors responsible for constructing the Bosco Bridge and other infrastructure projects.
Committee members questioned both the municipality’s financial sustainability and government’s role in supporting local authorities.
Khubuta Member of Parliament Masiphula Mamba questioned the criteria used by government when allocating subventions to municipalities, arguing that it was difficult for towns to develop without consistent financial support. He also sought clarity on the agreement between the municipality and government regarding funding for the Bosco Bridge.
Nhlambeni MP Manzi Zwane commended the municipality for establishing an alternative bus rank but questioned whether it would be able to operate effectively during the rainy season. He also expressed concern over the municipality’s financial controls, the escalating legal costs facing the council and the continued development of new shopping malls despite the apparent decline of Riverstone Mall.
Matsanjeni North MP Sicelo Ndlangamandla sought details on the cost of the new bus rank and its anticipated completion date.
Responding to members’ concerns, Principal Secretary in the Ministry of Housing and Urban Development Dr Simon Zwane said the ministry was not responsible for the decision to discontinue government subventions.
“The decision to stop the subvention was made unilaterally by the Ministry of Finance. We are engaging the relevant authorities to have that decision reviewed. We are also looking at ways of assisting Manzini, including discussions on reimbursing the municipality for the Bosco Bridge, although those negotiations may take time,” he said.
Dr Zwane added that government was already honouring an earlier commitment to reimburse the municipality E30 million for restructuring costs.
…bus rank to cost E86 million
LOBAMBA-The Municipal Council of Manzini has revealed that the cost of constructing the town’s new bus rank has increased from the initial estimate of E66 million to E86 million.
Chief Executive Officer, Lungile Dlamini attributed the increase to additional project requirements and told the committee that the facility is now expected to be completed in February next year.
She also dismissed concerns over the viability of new shopping malls being developed in Manzini despite the struggles experienced by Riverstone Mall.
According to Dlamini, the success of commercial developments depends largely on location and market demand, adding that feasibility studies conducted for the proposed malls indicate that they are expected to operate as regional shopping centres attracting customers from across Eswatini, Mpumalanga and Mozambique.
…PAC warns Nhlangano against ‘sinking more money’ into E10m SCBS court battle
LOBAMBA – Public Accounts Committee (PAC) Chairperson Madala Mhlanga has cautioned the Nhlangano Town Council against spending more public funds pursuing the recovery of E10 million invested in the now troubled Status Capital Building Society (SCBS).
Mhlanga warned that the municipality risks paying more in legal fees than it may ultimately recover.
He issued the warning yesterday when the Nhlangano Town Council appeared before the PAC to respond to issues raised in the Auditor General’s Compliance Audit Report for the financial year ended 31 March 2024.
The committee’s scrutiny centred on an E10 million fixed deposit investment made by the municipality with SCBS, whose recoverability has become increasingly uncertain following the institution’s financial difficulties.
The matter stems from findings by Auditor General (AG) Timothy Matsebula, who reported that the municipality continued to reflect the E10 million investment as an asset despite significant doubt over whether the funds would ever be recovered.
According to the AG, the council had assessed the investment against the backdrop of SCBS’s financial distress, ongoing legal recovery efforts involving other investors and concerns over the institution’s ability to meet its financial obligations.
These factors, he said, raised substantial uncertainty over the recoverability of the full amount.
In his report, Matsebula concluded that carrying the investment as an asset had materially misstated the municipality’s financial statements by E10 million.
The Auditor General recommended that the municipality apply International Accounting Standard (IAS) 36 on the impairment of assets, arguing that the investment should be fully impaired because there was no reasonable assurance that the money would be recovered.
He also advised the council to apply IAS 37 by disclosing the investment in the notes to its financial statements, allowing users of the accounts to understand the nature of the investment, the uncertainty surrounding its recovery and the fact that its eventual outcome was beyond the municipality’s control.
At the time of the audit, management indicated that it expected to recover the funds during the 2025/2026 financial year through ongoing engagements with SCBS.
It further stated that full impairment would be considered during the 2024/2025 audit should no recovery materialise.
Appearing before the committee yesterday, Town Clerk Babsy Mavuso confirmed that the municipality had already impaired E1 million of the investment and would impair the remaining E9 million in the current financial year.
She also informed the committee that the legal matter remained before the courts after being postponed once again.
“In line with accounting standards, we impaired E1 million last year and this year we will impair the remaining E9 million. However, that does not mean we have abandoned efforts to recover the money. The matter was in court yesterday but was postponed, and we have also developed an investment policy to guide future investments by the municipality,” she said.
Mhlanga, however, questioned whether continuing with lengthy litigation represented value for money for taxpayers.
“You may end up paying lawyers more than you recover. You must decide whether it still makes sense to continue with the case. Lawyers are unlikely to tell you to stop, yet every postponement costs money. Next year you may still be reporting that the matter remains before the courts,” he cautioned.
The PAC chairperson also questioned the rationale behind the investment, asking whether the municipality had been attracted by unusually high returns and whether the E10 million had originated from rates collected from residents.
Khubuta Member of Parliament Masiphula Mamba echoed those concerns, seeking clarity on the source of the funds and the basis upon which the municipality believed it stood a realistic chance of recovering the money should SCBS ultimately be liquidated.
Auditor General Matsebula was equally critical, expressing concern not only over the doubtful investment but also over the manner in which it had been made.
“This should never happen again. These are public funds and the council never obtained the Minister for Finance’s approval before investing them. You cannot simply take government funds and invest them in a scheme without the required authority. This must serve as a lesson,” he said.
The municipality’s treasurer explained that impairing the investment was purely an accounting requirement and should not be interpreted as abandoning recovery efforts.
“Impairment simply removes the investment from our financial statements so that it is no longer reflected as a recoverable asset. It does not prevent us from pursuing recovery through the courts. We remain hopeful that the legal process will result in at least some of the money being recovered,” the Treasurer said.
Mavuso further confirmed that the E10 million invested in SCBS originated from rates collected by the municipality.
The exchange highlighted broader concerns by the committee over the management of public funds by local authorities, with members stressing the need for stronger governance controls and strict adherence to legal requirements when investing municipal resources.
The municipality told the committee that, in addition to complying with the AG’s recommendations, it had since developed an investment policy to ensure that future investment decisions are guided by clear governance procedures and applicable legislation.
The matter remains before the courts, with the municipality maintaining hope of recovering at least part of the E10 million despite the AG’s assessment that the investment has become doubtful.
