ANC backs Operation Vulindlela to tackle municipal debt

Intragovernmental debt, a strain on essential-services agencies such as Eskom, is spiralling. Debt owed to the power utility nearing R100bn poses a daunting task for the presidency and Treasury initiative aimed at reinvigorating the ailing economy.

By May water boards were owed R21.3bn by municipalities, threatening the sector’s viability and weakening the boards’ operations. Similarly, municipalities owe Eskom R82.3bn, Bloomberg reported on Tuesday, more than double the load in 2021 when their borrowings stood at R35bn.

The second phase of Operation Vulindlela, a joint initiative of President Cyril Ramaphosa’s office and the Treasury created in 2020, will focus on municipalities.

For the first time, the ANC, the majority party in the government of national unity, gave details about how the governmentwide programme would tackle local government problems, which have soured the mood in the boardrooms of companies such as poultry group Astral Foods. 

The “debilitating intergovernmental debt crisis where municipalities owe agencies and utilities at a national government level is a spiralling problem”, said the party head of the local government subcommittee, Parks Tau.

“There needs to be a greater appetite to partner with the private sector to mobilise resources in addressing some of the challenges and to ensure we mobilise resources across the board including [development finance] and blended finance. We need an overarching solution to the debt crisis in our local government system and how that affects service delivery.”

The party identified performance of municipalities as a major obstacle to economic growth. Their poor showing featured in Ramaphosa’s opening of parliament speech in July, in which he said municipalities must wear two hats: providers of social services and facilitators of economic growth.

“As the national government, we have both a constitutional responsibility and a clear electoral mandate to assist municipalities in the effective exercise of their powers and functions,” said Ramaphosa.

In launching the three-year, R254bn Eskom debt relief package in 2023, the Treasury flagged rising municipal debt as a major risk to the success of the bailout in addressing Eskom’s lopsided capital structure. Recognising this risk, the Treasury launched the municipal debt relief programme.

Operation Vulindlela ticked off more than 90% of the items on its original list, among them the auction of digital spectrum and regulatory changes to enable private electricity generation and create a competitive energy market, as well as clearing the water licences backlog and reforms to the rail and port system and visa regime.

Tau told reporters after a three-day meeting of the ANC’s national executive committee on local government that the lekgotla resolved to intervene in ANC-governed municipalities battling service breakdowns and struggling to maintain infrastructure crucial to economic growth.

This includes repurposing grants from the Treasury that are allocated to project preparation, urban settlement development, the upgrading of informal settlements, public transport and neighbourhood development.

“We are going to look at all the grants and subsidiaries that go to municipalities and repurpose them to address service challenges ... a lot of money that goes to the local government goes back to the Treasury because of underexpenditure, but your services are challenged,” said Tau.

With Kabelo Khumalo

maekot@businesslive.co.za