EThekwini’s chief financial officer, Krish Kumar, maintains the city is tightly managing its revenue. Picture: Motshwari Mofokeng/African News Agency (ANA)
EThekwini’s chief financial officer, Krish Kumar, maintains the city is tightly managing its revenue. Picture: Motshwari Mofokeng/African News Agency (ANA)

R2.3bn of eThekwini’s R15bn outstanding debt unlikely to be recouped

By Desiree Erasmus Time of article published Oct 29, 2020

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Durban - THE eThekwini Municipality has seen its debtors book rise to nearly R15billion, up by R2.3bn year-on-year, with the increase made up almost entirely of debt that will likely never be recouped, as the fallout of Covid-19 lockdowns continues to have a negative impact on the local economy.

Of the outstanding debt, the city is anticipating that R6bn will either be impossible or difficult to collect.

Among the likely bad debts is R192.5million owed by the Ingonyama Trust, which manages land owned by the Zulu Royal Household; R219m from hostel tenants, and R757.6m that is tied up in multi-year credit repayment plans - which the city is doubtful will be fully recouped.

The figures are according to the municipality’s quarterly budget report for the period ending in September, which was tabled before the executive committee on Tuesday.

Government institutions continue to be one of the biggest non-payers for services.

The total outstanding amount from the government was sitting at R948.6m at the end of September, with nearly half of this, R462.1m, having been outstanding for more than four months.

The biggest defaulters are Section 21 schools (non-profit schools) falling under the KwaZulu-Natal Department of Education (R156.7m), followed by Public Works (R34.4m) and Water Affairs (R28.5m).

According to the report, letters of final demand have been issued to the Section 21 schools and hostel dwellers that are in arrears, while the city is stuck in an ongoing legal dispute with the Ingonyama Trust and Durban Transport operator Tansnat, which owes R561m.

Furthermore, the city only has about R3.7bn in the bank, which represents just 40 days of cash on hand, having burnt through at least R2bn of its reserves during the past six months.

The pressure on the city’s treasury is the result of plummeting collection rates as the economy battled under the stringent lockdown regulations.

EThekwini’s chief financial officer, Krish Kumar, maintains the city is tightly managing its revenue.

He told Exco the low collection rates for 2020 would continue to have a long-term impact on the city’s overall cash flow.

“We must concentrate on expenditure. Unless we curb expenditure, we will be found wanting. We would prefer to have cash on hand in the range of 60 to 90 days where we have always been, and there is a strategy to deal with this.

“One must appreciate the impact of Covid-19. We did severely utilise our reserves. We dropped our reserves by about R2bn because of poor collection rates,” said Kumar.

Also, according to the report: “With the country now at level one, it is expected that more businesses will be able to operate again and an improvement in payments from customers is anticipated.”

According to recommendations to the Exco, “austerity measures” must be applied in terms of “reducing expenditure to prevent further liquidity concerns, in ensuring reasonable cash on hand at the year-end”.

The year-to-date collection rate sits at 90%, just 5% shy of Treasury recommendations of 95%.

Kumar said by the end of October it was hoped that the yearly average would rise to 93% as revenue collection improves. “I need to remind everyone that collection rates in April were 56%. This has had a negative effect on cash on hand,” said Kumar.

Daily News

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