File picture: Independent Media
File picture: Independent Media

Revenue losses to hit KZN municipalities combined with impact of unrest on businesses, consumer debt

By Vernon Mchunu Time of article published Aug 5, 2021

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DURBAN - KWAZULU-NATAL municipalities, already burdened with consumer debt of R27.2 billion, now also face decreasing revenues as local businesses battle to recover after the recent unrest.

Several retailers, shopping centres and small-scale SMMEs were hit by the looting and unrest in KwaZulu-Natal last month.

The eThekwini Municipality is expecting to lose up to R750 million a year, while Ugu District Municipality on the South Coast, described as one of the worst affected local authorities, has estimated the cost of damages on its infrastructure to reach R100m.

Of the three spheres of government in KZN, local government would lose “hundreds of millions in revenue”, according to a report to the legislature presented by KZN Co-operative Governance and Traditional Affairs (Cogta) MEC, Sipho Hlomuka. For eThekwini alone, lost revenue was expected to rocket to about R750m, said spokesperson Msawakhe Mayisela.

Owing to the cost of damage to the metro’s business properties estimated at R15bn, the city has applied to the national government to be declared as being in a state of disaster, a move aimed at unlocking additional grant funding to enable budget adjustments to meet pressing recovery needs.

The repair and reopening of malls, where a mall had been burned to the ground, was likely to take at least two years, according to the SA Property Owners Association (Sapoa).

“During 2020 and 2021, landlords had to bear the full brunt of the lockdown, and continued making payments (in respect of) utilities and property rates even when properties were not rent producing,” said Sapoa president Andrew Konig.

“It has been calculated to date that some 800 stores were looted and 100 malls have been burnt down or have suffered significant fire damage, and a number of distribution centres, particularly in Durban, have been looted with serious structural destruction,” he said.

“The repair and the reopening of malls that have suffered relatively little damage may take a couple of months,” said Konig.

Professor Irrshad Kaseeram, a senior economist, said the expected loss of revenue that would have been generated through service charges alone could spike up to R100m a month.

“These municipalities could ill afford the loss given that many indebted residents are already underpaying or not paying for services. This could mean a further deterioration in the delivery of vital services, including electricity, water, sanitation and roads maintenance. Given the recent declaration of our metros to junk status, it will be difficult to raise capital on international markets at a low cost,” said Kaseeram.

According to the Cogta department , KZN’s municipal consumer debt had shown a marked R3.47bn spike from R23.8bn to R27.2bn.

Hlomuka said this placed KZN municipalities in a precarious state as they were expected to continue to provide essential services such as waste removal, electricity and sanitation amid an environment of reduced revenue.

Massive job losses – which were estimated by Kaseeram to be at more than 150 000 as a result of the unrest – would mean fewer people would be able to pay for services, said Hlomuka.

Cogta has further identified 10 municipalities for support, specifically, in consumer debt relief during the 2021/2022 financial year, including Newcastle, Jozini, Umdoni, Nkandla, Ubuhlebezwe, Alfred Duma, Endumeni, Abaqulusi, Umngeni and Mandeni.

The application for the province and the city to be declared disaster areas, said Hlomuka and eThekwini mayor Mxolisi Kaunda, would help harness financial resources required for repairs on infrastructure.

It would also help in the implementation of the Provincial Economic Recovery Plan.

“(Municipalities) will be required to put other service delivery plans on hold (to allow) for repairs and rehabilitation of affected public infrastructure to stimulate the economy,” he said.

In Ugu, rioters burned municipal property including two excavators, two graders, 12 water tankers, 18 service delivery vans, an open bin truck, two TLBs, a bus, a light motor car, a number of offices, storage garages and guardhouses – a loss the municipality costed at R100m.

“This destruction of assets comes at a time when the district is grappling with severe water shortages, and the destruction of its fleet puts a severe strain on its ability to render this essential service,” Hlomuka said, adding that senior officials from the department’s Development and Planning business unit had been deployed to help KZN municipalities rebuild.

“Municipal buildings and offices were set on fire and destroyed, including the whole office block building at our Mkholombe depot.

“We therefore wish to advise our residents of possible delays in response time to service delivery requests that have been made through our customer service portals,” said Ugu spokesperson France Zama.


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