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File picture: Pexels

R1bn in rates could be lost if Durban Metro writes of interest for ratepayers affected by lockdown

By Chris Ndaliso Time of article published May 20, 2020

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Durban - THE eThekwini Municipality stands to lose about R1 billion if the city’s full council approves the city’s executive committee (Exco) recommendations to write off accrued interest on rates and services as a relief to account holders during the national lockdown

If approved, all interest on customer accounts that participate in this relief scheme will be reversed and written off.

According to a report by the city’s revenue management unit, tabled during an online Exco meeting, the exact total value in loss is unknown because the number of customers taking up this offer is also unknown.

“ but it is estimated that an amount of R1bn will be written off. The actual amount will be reported to the council in July 2020. Before the lockdown on March 27, 2020 the city had a collection rate of 94%. The collection rate for the month of April 2020 has plunged to 56% an ever-low collection rate for the city,” reads the report.

The total outstanding debt of 90 days and older in the city is R10bn and the average interest raised over the last three years amounts to R403 million per annum. The report recommended that the council approves the granting of Special Covid-19 interest relief to customers who pay 50% of their arrears bill debt of 90 days or more, excluding interest on or before June 30.

Some measures to provide relief to customers already implemented were outlined. These include no interest on accounts in arrears during the lockdown period and no credit control in the form of disconnections conducted during this time.

The report outlined a further measure to provide relief to customers including an initiative to reverse the total interest raised to customers’ accounts if the customer pays 50% of their arrears on or before 30 June with the remainder of the debt to be put on a payment plan which should not exceed 24 months, interest-free. This incentive will only be offered to customers with a debt of 90 days or older.

However, all interest written off will be reinstated where a customer defaults on the payment plan.

DA caucus leader Nicole Graham said: “The situation is not ideal but I think that treasury is coming up with solutions to try and get people who otherwise wouldn’t pay, to incentivise them to pay. I think that’s the rationale behind writing off the interest. This will certainly help the city’s cash flow and that’s why we’ve supported it.”

IFP councillor Mdu Nkosi said the government has made provisions for all municipalities to prepare them for the financial knock that came with the national lockdown.

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