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Midlands Bureau Chief
GWERU City Council’s budget has depreciated by over 72 percent because of hyperinflation and the local authority is now posting negative returns, a situation that is affecting service delivery.

Residents are facing water challenges; litter remains uncollected and potholes are common on the roads.

Government approved a $4,9 billion 2022 budget for the city of Gweru.

Addressing the business community during a breakfast meeting organised by Gweru Residents and Ratepayers Association (GRRA) yesterday, City of Gweru assistant director of finance Mr Owen Masimba said the 2022 budget was prepared against a backdrop of continued uncertainties over the recovery of the global and domestic economies.

“The $4,9 billion budget was equivalent to US$46 million as at 15 November 2021 being the date of submission for approval to the Minister of Local Government and Public Works at the then auction rate of 105,69.

As at 22 June 2022 interbank rate was 387 after factoring the 10 percent margin, by applying that rate the US$ equivalent of the same $4,9 billion budget was US$12 million, a depreciation of US$33,9 million or 72,7 percent loss in value.

So only 27,3 percent remains up to the end of year assuming no further movements in the rate are experienced,” he said.

“The increase in inflation was a result of a combination of global shocks and the pass-through effects of the recent exchange rate depreciation on the parallel market, with a significant proportion of the inflationary pressures emanating from the impact of the on-going Russia-Ukraine conflict.”

Mr Masimba said the City of Gweru’s monthly billing averages $265 million whereas the fixed and unavoidable running costs that are now changing weekly with the interbank rate stood at $337 million as at May.

“This gives a negative balance of $72 million for the Month of May alone before factoring in other variable costs and creditor mandates,” he said.

Mr Masimba said what creditors are owed jumped from an average of $380 million to $870 million which leaves council stuck.

“The obtaining situation will compromise the council’s capacity to give quality service to its clients in the absence of a supplementary budget,” he said.

Council’s budget and pricing, Mr Masimba said, has remained static from January 2022 to date.

“Now council has to buy goods and services for use in its service delivery value chain and it does so at the cost obtainable on the market and most service providers are pegging their US$1 at parallel rate of up to $700.

So, we make money at $105 and we are forced to go and buy goods at $700 on the market and in the process, we are making losses.

That is why we are now posting negative returns,” he said.

Mr Masimba said in January, the electricity bill for the water treatment plant averaged $12 million per month and it shot to $75 million as of May.

“The jump was not budgeted for.

Other creditors are now angling towards $800 million. Fuel averaged $800 000 per month shot to $17 million in May 2022.

Water chemicals averaged 1,5 million shot to $14 million in May 2022

“We have nothing that we can do except to just accept the prices as they are.

For example, we buy raw water from Zinwa and the water authority pegs its price in USD payable at interbank rate at the point of invoicing; the same with sub-catchment fees, they are indexed to the USD and payable at interbank rate,” he said.

Mr Masimba said effectively the cost of doing business for council changes every week or every Tuesdays, at the conclusion of the auction market as new rates are announced.

“So, for the first six months of 2022 council’s cost of doing business has changed 24 times albeit its pricing has remained stagnant, and the 24 times signifying an absorption of costs that were unbudgeted for.

“In terms of Section 47 of the Public Finance Management Act a public entity cannot alter its budget without the approval of the appropriate Minister, reason why there has not been an immediate response by council.

“We have to follow due process to rectify the runaway disparity between our revenues and expenditure pressures from increased cost against declining revenues,” he said.