MSUNDUZI municipality, the capital of KwaZulu-Natal, may have stabilised financially after coming out of provincial administration, but a contract award has set alarm bells ringing about the city's financial management.

Pietermaritzburg emerged from nearly two years of provincial administration last year after it fell victim to problems faced by municipalities across SA: falling revenues, growing debt, crumbling infrastructure, corruption and decreasing technical and other skills.

However, despite new tight financial controls in place, the municipality has bypassed normal tender procedure in the award of a billing system contract. Democratic Alliance (DA) spokesman on c o-o perative g overnance and t raditional a ffairs, George Mari, says alarm bells should be ringing about reports that the Msunduzi municipality failed to adhere to supply change management procedures by awarding an SMS/MMS billing service contract without the business going out to tender.

He says that municipal officials, at an oversight visit to Msunduzi on June 19, failed to mention that the contract for the billing system had been awarded under Section 36, a regulation that allows officials to bypass normal tender requirements if there is an emergency, and one that has often been abused to make fraudulent municipal contract awards.

However, Msunduzi municipality spokesman Brian Zuma says that the billing system has been successful at seven other municipalities in KwaZulu-Natal, and Section 36 was chosen because the billing system "was totally new terrain for the municipality".

Mr Mari says one of the municipality's core strategies for its turnaround is to improve financial administration through proper supply change management. "Deviation from this process has been cited as one of the main reasons for the fraud and corruption that led to the municipality being placed under administration."

Mr Mari says that while there has been an overall improvement at Msunduzi municipality, there is still too much water loss, too many staff shortages and not enough traffic police, while forensic investigations and action against errant officials need to be concluded.

Debt of R899m, with about R542m of that being over 90 days, is a threat to the municipality's sustainability, he says.

He says the DA will ask the provincial treasury to develop and implement a debt management system to recover the debt.

But Mr Zuma says the city has already put together a strategy to recover R1bn owed to it by residents, businesses and other government organisations. W hile the municipality may not yet have fully recovered financially, the revenue collection rate at 90% is much improved from 52% when the municipality was in "troubled times", Mr Zuma says.

"We have been able to swim out of very murky waters, and we now have money in our account and are able to meet our responsibilities," he says.

Inkatha Freedom Party (IFP) Msunduzi caucus leader Dolo Zondi says the turnaround of the municipality is "a work in progress" and he is sceptical about the financial sustainability and turnaround of the city.

T here are still too many power cuts and problems with refuse removal, he says. Mr Zondi says apart from better debt collection, the functioning of the African National Congress-led municipality needs to be depoliticised as there are too many political deployments.

He believes the provincial government should be playing a far greater role in the city given that it is the capital of the province.

Mayor Chris Ndlela said recently that 25 new posts would be created in the plan to recover the R1bn of debt. He tabled the city's R3,2bn budget at the end of May.

It was the first budget to be tabled since the city came out of provincial administration.