The Dannhauser Local Municipality in KwaZulu-Natal has haemorrhaged millions of rand and, admittedly, it is now finding it "difficult to finance its day-to-day operations".

This according to a budget and treasury office memorandum that Dannhauser municipal manager Mandla Sithole sent to staff and councillors on 6 October. 

In the notice, Sithole informed employees and councillors the municipality had already depleted its first tranche of the equitable share - which he told News24 was at R47-million in July 2023. 

The implication is that the municipality now has no money to run some of its daily functions.

With its seat in Dannhauser, under the Amajuba District, the municipality is overseen by a coalition made up of the African National Congress, Economic Freedom Fighters, and Community Freedom Party.

Sithole said the situation of failing to pay December salaries arose only because the previous municipal manager did not make plans for those salaries. 

However, he added the municipality would now be able to pay salaries due to revenue collection. 

Sithole's memorandum read, "This memo serves to inform everyone that the municipality is facing cash flow challenges since July 2023. As a result, the first [tranche] of equitable share has been exhausted and the payment [for government properties' rates] expected from the Department of Public Works has not been received. This makes it difficult to finance day-to-day operations."

In the notice, Sithole implored staff and councillors to bear with the process.

"Everyone will be notified when everything is back to normal," it read. 

The notice comes at a time when National Treasury has repeatedly said the government is running out of money and must implement cost-cutting measures. 

Speaking to News24, Sithole confirmed circulating the memo to staff and political figureheads.

"The purpose of the circular was to apply a cost containment circular from provincial treasury. With management, we are trying to eliminate procurement that doesn't address service delivery needs and we want managers to reprioritise their procurement plan needs," he said.

Sithole added it was true the municipality was running out of cash to finance its day-to-day operations. 

He said it had dried up its equitable share, which was at R47-million when he took over.

According to him, the previous municipal manager had made no provisions for December salaries to be paid.  

Sithole said of this amount, he had only been able to use R14-million since he was appointed.  

"The first equitable [share tranche] was received in July 2023. The previous municipal manager and the chief financial executive did not cater for salaries up to December."

The council, according to him, had instituted a probe to determine why that tranche was not preserved to ensure better financial cash flow. 

Sithole said the municipality had collected rates from private customers and input VAT claims from SARS and other service charges and, as a result, salaries would now be paid.  

He added the investigation into the previous municipal manager and CFO's actions regarding the cash flow mismanagement crisis in terms of the Municipal Finance Management Act was instituted by the council and was ongoing. 

Sithole's notice suggests the situation was exacerbated by the Department of Public Works and Infrastructure defaulting on payments for municipal rates on all government properties within the municipality.