Debt owed to municipalities continues to climb

The total debt owed to municipalities by households, organs of state, business and other entities continues to climb.

Municipalities were owed R305.8bn at end-December, a 17% increase over the R261.5bn owed at the same time in 2021/22, figures released on Monday by the Treasury show. The figures form part of a general report of local government revenue and expenditure from July 1 to December 31 2022.

An amount of R3.4bn has so far been written off for the debt owed by all 257 municipalities in the country with R257bn of the debt being owed for longer than 90 days. The highest amount owed — R99,6bn — was for the provision of water, R39,3bn for electricity, R63,4bn for property rates and R30bn for waste water management.

Households owed municipalities R217bn, organs of state R23bn and business R61bn.

The failure of consumers to pay their electricity bills has meant that municipal debt to Eskom increased and stood at R56.3bn at the end of December. Finance minister Enoch Godongwana announced in his budget speech in February that the Treasury was working with Eskom on a solution in terms of which power utility would provide incentivised relief to municipalities whose debt is unaffordable.

He emphasised however that the relief would come with conditions. “To avoid a repeat of debt build-up over time the relief will attach measures including the installation of prepaid meters to correct the underlying behaviour of nonpayment and operational practices in these municipalities.”

Municipalities fear that the tax incentive of R15,000 for households to install solar panels will take the middle-class customers off the grid and negatively affect their revenue and their cross-subsidisation of poor households.

Of the provinces Gauteng had the highest amount of outstanding debt of R111bn, followed by KwaZulu-Natal at R41bn and Eastern Cape at R32bn. The metros were owed R154bn and secondary cities R59bn.

“If consumer debt is limited to below 90 days then the actual realistically collectable amount is estimated at R49bn. This should not be interpreted that the National Treasury by implication suggests that the balance must be written off by municipalities,” the Treasury said in a statement.

Municipalities owed their creditors R86bn at end-December with the Northern Cape, Mpumalanga and North West being the main culprits. The Treasury said that the increase in outstanding creditors “could be an indication that municipalities are experiencing liquidity and cash challenges and consequently are delaying the settlement of outstanding debt owed”.

The total balance on borrowing for all municipalities was R59bn at end-December. This includes long-term loans of R44.3bn, long term marketable bonds of R8,4bn and other long term non-marketable bonds of R5.1bn with the rest made up of other short and long term financing instruments.

By end-December total investments made by municipalities were R43bn.

ensorl@businesslive.co.za