City of Cape Town being strangled by R9.4bn debt
Cape Town - Businesses and individuals owe the City of Cape Town more than R9.4 billion which includes R1.3bn for indigent properties where the debt is unlikely to be recovered.
The City’s finance directorate sent a report to the finance portfolio committee showing it was owed R7.27bn by households and a further R1.48bn by businesses, with other outstanding debt totalling nearly R597 055.
“Although there is a reduction of R587 193 437 and R43 319 951 in residential and business debts respectively; it must be noted that in order to improve revenue collections, the City will continue enforcing payments of outstanding debts through effective debt management actions,” the report stated.
“Due to this debt, the City has to make a provision for bad debt in its budget, which means that fewer services are delivered.
“If those who have the means to pay refuse to pay for services that they use, it has a large impact on the sustainability of the City,” said Ian Neilson, mayoral committee member for finance.
The City’s finance directorate also stated in its report that there were a number of property owners who were tenants of City properties that are in arrears of R6.967bn as at the end of March.
The City’s chief financial officer, Kevin Jacoby, said: “It is therefore important for all property owners, the City’s public housing rentals and loans tenants or debtors and tenants or leased properties to pay their accounts in full on or before the due date or make arrangements to pay off their arrears debts over an agreed period of time, based on their ability to pay.”
During the month of March, more than 17 403 letters of demands were sent out and 1 132 debtors were listed for adverse credit listing. A total of 284 electricity prepaid blocking/daily charge collection letters were delivered and 327 accounts were sent for prepaid electricity purchases collection during March.
“If any resident’s water is restricted, electricity supply disconnected, prepaid electricity purchases limited or legal action instituted, then it is clear that they have ignored all the notices sent and not made any attempt to obtain assistance from the City,” Neilson said.
He added that residents were encouraged to visit their nearest municipal office for advice and guidance as soon as possible should they have any queries regarding their arrears.
The report also stated that three councillors owed the City R139 500 in outstanding debt.
Jacoby said that the councillors’ debt was as a result of high water consumptions billed.
“The water department has investigated and resolved the investigations; payment arrangements are in place to settle the debts, which were finalised through the speaker’s office,” he said.
The City’s top 1 000 large debtors comprise mostly of commercial and industrial properties. As of the end of March, the total balance of outstanding debt was R1 328 552 611.
“The City needs everyone to contribute their fair share so that we can become an even more successful metro. Those who are in financial difficulties must approach us.
“Hoping that the debt will go away or ignoring the problem is not the answer and there is help on offer. As a caring City, however, we also make allowance for residents who are unable to pay for basic services to make representation to the City for relief… those struggling to pay their accounts must come into the City offices.
"(They must make an) agreed arrangement plan to pay off their arrears,” Neilson said.
Mike Heyns, of the civic activist group Stop CoCT, said that the City had pushed households into a tight space. “Individuals and small businesses are under tremendous pressure to keep up with rising costs, especially from the City of Cape Town, which increases tariffs by the CPI (Consumer Price Index) every year, plus lately two or three times CPI.
“The increase over the past four years for households is on average about 14% per annum, which is unsustainable, especially with the more vulnerable groups including pensioners. (They) are subjected to CPI income increases per annum and cannot keep up with the high increases any more. They simply start giving up.
“Despite a healthy cash flow and again an estimated underspending of capital expenditure by 15%, the City persists with higher-than-inflation increases. This will plainly result in more households falling in arrears and the outstanding debt will remain escalating,” he said.