This was one of the major issues thrashed out at the Salga inaugural Council of Mayors meeting that took place in Cape Town this past week.
Mayors from across the country came together to discuss challenges facing their municipalities, engage with national ministers and try and find solutions.
Collectively municipalities owe Eskom R9.6bn but are also owed R116bn by other creditors which include government departments.
This week, Co-operative Governance and Traditional Affairs Minister Des van Rooyen said 59 municipalities owed money to Eskom, with the Free State, Mpumalanga and North West owing the most.
In the Free State, municipalities owed the power utility R3.6bn, followed by Mpumalanga with R2.2bn and North West with R780 million.
Gauteng, municipalities owe Eskom R508m, KwaZulu-Natal R6m and Western Cape R11m.
And in the Northern Cape, municipalities owe the power utility R465m.
In the Eastern Cape they owe R328m and in Limpopo the debt was R287m.
Some municipalities have been in bitter wars with the power utility over unpaid debts which resulted in Eskom threatening to cut power supplies.
National Treasury has also withheld the equitable share of municipalities that had defaulted on their payment agreements with Eskom.
In a presentation by the Financial Fiscal Commission’s Dr Mkhululi Ncube municipal debts were fingered as one of the big key factors that are risking the financial sustainability of municipalities.
“The biggest threat to the financial sustainability of municipalities is the economy itself, in terms of the job losses which in turn threatens those who pay their rates to sustain municipalities,” he says.
“The other issue is municipal debt and consumer debt; it is affecting the financial debt of municipalities. We know that municipalities owe Eskom, the Water Board and other entities but we also know municipalities are owed huge amounts of money.
“We know that in mid 2016 they were owed R113bn by other organs of state.
“This is the money municipalities are foregoing and this is affecting their financial health.”
Speaking on the sidelines of the two-day meeting, a mayor from the North West Province, Naledi Mokgadi, said having the debt written off was the first step in securing the future.
“We are asking that these debts owed by municipalities be scrapped because the reality is that many municipalities are unable to repay these amounts; we can sit here and talk until we are blue in the face about fixing our financial situation but we cannot do that if we are starting our books on a negative,” she said.
“Many of us are struggling to stay afloat as it is and bearing the responsibility of paying millions back, of which a large portion is interest on existing debt, is crippling.
“Salga as a body needs to engage national government and Eskom to write off the debts.”
Another challenge facing the financial outlook for municipalities was the dwindling number of consumers who were paying their rates.
Standard Bank’s Siphamandla Mkhwanazi says according to their analyses, low and middle income earners spent less and less each year to service their municipal debts.
“Low income earners saw a decline of 0.4 percent towards their contribution to utility services, these are people who want these services but are not willing to reciprocate by paying for these services.
“And with middle income earners, their attitude is that they feel because they are the drivers of tax, they are being taxed for the provision of these services, why must they turn around and have to pay for them again.
“What we see in these kinds of households is people paying for their cars rather than servicing their municipal bills.”
The association’s president Parks Tau says it is also looking at alternative funding solutions for struggling municipalities.
“If we don’t take this approach, we place at risk the ability of local government to provide services to municipalities in a sustainable manner.”