Consumer debt owed to municipalities soars to R191bn
The debt owed to municipalities by ratepayers soared to R191bn at the end of the past financial year, with collection of the bulk seen as unrealistic, says a Treasury report on local government finances.
SA’s already ailing municipalities have been hit hard by a national lockdown imposed to combat the spread of the Covid-19 pandemic. The lockdown resulted in many municipalities suspending credit-control measures to cushion businesses and residents against the economic devastation caused by the lockdown. Johannesburg metro alone is said to have lost more than R1bn in uncollected revenue during the lockdown.
In the local government revenue and expenditure report for the fourth quarter of the 2019/2020 financial year, the Treasury said aggregate municipal consumer debts had risen to R191.5bn, from R181.3bn in the third quarter.
The 2019/2020 financial year for municipalities ended in June, three months after the introduction of the lockdown.
According to the Treasury, government agencies account for 7.7% or R14.8bn of the total outstanding debt, and the largest component of the debt is related to households. This amounted to 69.9% or R133.9 bn of the total debt — having increased from R127.7bn in the third quarter.
“It needs to be acknowledged that not all the outstanding debt of R191.5bn is realistically collectable, as these amounts are inclusive of debt older than 90 days [historic debt that has accumulated over an extended period], interest on arrears and other recoveries,” the Treasury said.
However, the Treasury said this should not be interpreted to mean the balance should be written off by municipalities.
The Treasury said if consumer debt was limited to below 90 days, then the realistically collectable amount was estimated to be R33.4bn.
The bulk of the debt was owed to SA’s large metropolitan municipalities, as the eight metros were owed R102.3bn, which was up from R88.1bn in the third quarter.
The Treasury said the largest contributors were the City of Johannesburg, which is owed R31.1bn; the City of Ekurhuleni, which is owed R16.4bn; the City of Tshwane, which is owed R16.2bn; and eThekwini, which is owed R13.5bn.
NEWS ANALYSIS: Covid-19 turns up the heat on shaky municipal finances
Risks posed by municipalities' already weak finances are beginning to materialise
WATCH: Covid-19 pandemic infects municipal finances
Business Day TV talks to a panel about the measures some of the major metros are implementing to manage the economic ...
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.