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Herald Reporter
Government has backtracked on the decision to suspend councils from borrowing, with Secretary for Local Government, Public Works and National Housing Engineer George Mlilo yesterday saying they were now going to be strict on councils when they seek loans. The current policy requires councils to apply for borrowing powers from the ministry before taking loans.
The ministry approves or disapproves the requests. When he announced the suspension on councils from borrowing, Eng Mlilo said municipalities were failing to settle debts. They would then lose property to creditors, leaving them with no capacity to provide services. “At the ministry, we should support them, but when we support them we should also be convinced as a ministry that the local authority that is applying for borrowing powers has ability to pay back what they have borrowed,” said Eng Mlilo yesterday.
“There will be further restrictions to make sure people do not just borrow for the sake of borrowing without an ability to pay back. We just want to make sure we control the borrowing powers so that whatever we support there must be evidence that the borrower should be able to pay back.” Eng Mlilo said his ministry would not approve borrowing where the local authority was already broke.
He said allowing the councils to borrow would further strain them. Local authorities had condemned their parent ministry for suspending their borrowing powers, saying the decision would cripple their operations. They further claimed the move was going to scuttle existing and future developmental projects aimed at improving cities and towns. Councils are owed a combined $1 billion by ratepayers. They argue that new housing projects and sewer expansion and rehabilitation programmes cannot be funded by ratepayers, but through other sources. Most ratepayers are failing to pay for services provided by councils.
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