Salga KZN raises alarm on rising debt owed by government departments to municipalities

Coins and a calculator on a page filled with numbers.

File Picture: Government debt for municipal services in KZN has just passed the R2.5bn mark.

Published Dec 29, 2023

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Debt owed by government departments to municipalities in KwaZulu-Natal has reached an all-time high.

The KwaZulu-Natal chapter of the South African Local Government Association (Salga) is sounding the alarm over the debt and warned it was now R2.5 billion, the highest amount it has ever been. The organisation, which monitors municipalities across the province, addressed the issue recently when it delivered a statement on the state of municipalities in the province.

Salga KZN said in a statement: “Government debt for municipal services in KZN has just passed the R2.5bn mark for the first time in history. When government and businesses fail to pay or delay paying for the water, lights, rates and refuse removal services they receive, municipalities often have to secure commercial bank loans to ensure that projects do not grind to a halt.”

Salga manager in KwaZulu-Natal Sabelo Gwala said the debt was incurred mostly by service delivery departments like the Department of Education, which makes it hard for municipalities to cut off their supply of water and electricity because they were providing essential services.

The Department of Education has admitted to owing municipalities in the past, and recently paid the eThekwini Metro R90 million after the municipality disconnected its services.

Gwala said: “The municipalities are currently owed just under R3bn by departments. This dates back to 2016. Back then it had dropped to around R700m but has since gone up and is now reaching the highest level it has ever been in the history of this government.”

He said this made it difficult for municipalities to implement projects. “In order to continue with projects in order to avoid protests by communities, municipalities have to go to commercial lenders to borrow the money, and when they do that they are now exposed to interest rates.

“We know that in the past two years, interest rates have been going up consecutively, therefore harming the municipality in a double whammy because you (municipality) are trying to push projects and now you are faced with interest rates.”

Among other pressures, Salga said, were interest rate hikes and low business confidence.

In a statement, it said it was concerned that the interest rate had not come down. “When homeowners use all their disposable income to service bond repayments, they need help to keep up with their rates and taxes. Interest rate increases negatively impact municipalities and their ability to provide services to communities and pay their suppliers.

“As of 31 November 2023, the RMB/BER Business Confidence Index has dropped to 31%. That means that less than a third of business executives are satisfied with prevailing business conditions.

“Only in a high business confidence environment will businesses invest in or expand. Municipalities cannot finance new water pipelines or new electricity transformers when businesses do not grow,” read the statement.

Two municipalities identified government debt as a serious problem.

DA mayor of uMngeni Municipality Chris Pappas said: “As uMngeni Municipality, we took an aggressive stance right at the beginning of the new term. We managed to recover a few million. We are currently owed about R1.8m.

“The biggest issue is with the Department of Education, both in terms of rates and electricity. Lower-income schools are really battling and they are not getting the type of assistance they need from the province,” he said.

The municipal manager of the Msunduzi Municipality, Lulamile Mapholoba, said the issue was serious.

He said the municipality had worked hard during Operation Qoqimali to reduce government debt arrears. The government debt was reduced from R218.9m in June 2022 to R158.9m as at November 30 this year.

“There is still a challenge where some of the government debtors are only servicing the current debt and not paying the old arrears debt. An extensive reconciliation exercise has been conducted with the assistance of the provincial Department of Co-operative Governance and Traditional Affairs (Cogta).

“Communication has been received from some of the government debtors citing challenges in settling the arrears debt due to budget shortages. Both provincial Cogta and provincial Treasury have offered their support in terms of recovery of arrears government debt. The municipality will continue to implement the credit control policy on all defaulting departments,” Mapholoba added.

The Mercury reported recently that parastatals and government departments owed the eThekwini Municipality close to R1bn.

EThekwini mayor Mxolisi Kaunda recently spoke of the City’s aggressive collection tactics, saying no one, including the government departments, had been spared.

He said in the past five months the municipality had disconnected more than 90 000 people who owed it money, and among those it disconnected was the Department of Education.

“(It’s said) we are not collecting, we are not pushing government departments to pay us. Let me tell you … the Department of Education, during examinations, when they were writing examinations, we switched them off. Then they came and paid more than R90m because we are acting on what we have committed to do,” said Kaunda.

The Office of the Premier had not responded to requests for comment by the time of publication.

THE MERCURY

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