National Treasury: Municipalities can only realistically collect R37bn of R231bn debt

By Loyiso Sidimba Time of article published Jun 19, 2021

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ONLY about R37 billion of the R231bn owed by consumers including households, businesses and the government for services delivered by the country's 257 municipalities is realistically collectable.

The National Treasury this week revealed that the country’s eight metropolitan municipalities are owed R115.4bn by March 31, with the City of Johannesburg’s share of the debt now at almost R35.6bn followed by the Ekurhuleni Metro with about R19.5bn, City of Tshwane (R17.55bn), R15.4bn for eThekwini as well as Cape Town with just over R9.2bn.

The total consumer debt owed to the country’s largest municipalities was about R88.1bn in the same period last year.

According to the Treasury, by the end of March this year, the aggregate municipal consumer debt was R230.7bn and it stood at R230.5bn on December 31, 2020.

Almost R74bn has been written off as bad debt.

The figures also show that the government accounts for 6.7% or R15.5bn, which is down from the R20.7bn reported at the end of December.

The Treasury also noted that households still represent the largest component of debt owed to municipalities at 72.5% or R167.3bn compared to R166.5bn six months ago.

”It needs to be acknowledged that not all the outstanding debt of R230.7bn is realistically collectable, as these amounts are inclusive of debt older than 90 days, interest on arrears and other recoveries,” reads the local government revenue and expenditure report for the third quarter of the 2020/21 financial year.

Debt older than 90 days is historic debt that has accumulated over an extended period.

However, the National Treasury warned that this should not be interpreted as implying that the balance must be written-off by municipalities.

“If consumer debt is limited to below 90 days, then the actual realistically collectable amount is estimated at R36.5 billion,” Treasury explained.

About R23bn of the R115.4bn consumer debt owed to the eight metros is below 90 days.

Free State municipalities have the most outstanding creditors older than 90 days at R15.4bn, followed by Mpumalanga with R12.3bn and Gauteng at R6.6bn.

On Thursday, Gauteng finance and e-government MEC Nomantu Nkomo-Ralehoko announced that the provincial government has paid over R6.1bn to municipalities for property rates and taxes since the 2018/19 financial year.

The provincial government’s debt paid an average of R2bn annually which also increased by over R200 million a year during this period.

Nkomo-Ralehoko said the provincial government’s debt now accounted for the smallest portion of outstanding debtors to municipalities, representing about 2% in aggregate.

She promised that Premier David Makhura’s administration will continue to assist municipalities with the facilitation of government debt payments and increase its efforts to ensure that the arrears are drastically reduced in the current financial year.

The SA Local Government Association (Salga) believes there is a clear link between municipalities’ ability to service their debt including to power utility Eskom and water boards and their inability to collect from the government, business and households for services delivered.

Salga has told municipalities that due to the situation becoming untenable for municipalities constantly threatened with disconnections by Eskom and water boards they should consider targeting government properties and businesses, through disconnection where there is sufficient merit and in line with their credit control policies.

The association also plans to conduct a rigorous analysis of the gross debt owed to municipalities, establish realistically collectable debt and that which can be considered for write off or repeal as historically uncollectable including using it as a basis to negotiate for the installation of pre-paid meters.

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