Gauteng’s 11 municipalities owed more than R130bn, says finance MEC

Gauteng finance MEC Lebogang Maile has called on the province’s 11 municipalities — which are owed more than R130bn — to develop and improve revenue enhancement strategies and implement austerity measures to ensure service delivery operations remain within the adopted budgets. 

“As 31 July 2024, the aggregate of outstanding debtors was R132.532bn. These are monies owed to municipalities by households, commercial entities and organs of state. Households owe R99.343bn while organs of state owe R3.730bn,” said Maile, during his address at the Gauteng Local Government Turnaround Summit in Muldersdrift, northwest of Johannesburg, on Wednesday.

“Money owed by commercial entities stands at R27.886bn. In the previous month, June 2024, the outstanding debt was R127.073bn. That it grew by over R5bn in 30 days indicates a growing trend on a month-to-month basis as at 30 June 2024. Our municipalities are struggling to collect revenue, and this is a serious cause for concern.” 

Municipalities owed Eskom, bulk water supplier Rand Water and other organisations R27.098bn as at July 31 2024, Maile said. 

“Eskom is owed R19.650bn while Rand Water is owed R2.410bn. Only 31.6% of this balance relates to current accounts — those that are less than 30 days. The remaining 68.4% balance relates to noncompliance with section 65.2(e) of the Municipal Finance Management Act,” he said. 

“This demonstrates not only poor financial controls and governance, but it also poses a very serious threat to economic and social development within our communities.” 

Maile, who is former co-operative governance & traditional affairs (Cogta) MEC, said his department, in partnership with Gauteng Cogta, had established a debt management committee (DMC) to help municipalities to collect debt for rates, taxes and municipal services from provincial departments. 

He said since its inception in the 2017/18 financial year, the committee had helped municipalities collect R17.27bn in service, rates and tax revenue from departments: “This support initiative has primarily benefited the three [Gauteng] metropolitan municipalities, which received the largest share of the funds.” This demonstrated the committee’s dedication to improving municipal financial stability and strengthening local governance. 

During the 2021/2022 financial year only 38 of the country’s 257 municipalities received a clean audit, from 41 the previous year, highlighting the effect of instability in a local government blighted by inadequate skills, cash flow challenges, systemic corruption and looting, governance failures and a lack of accountability and consequence management. 

For the year under review, the 257 municipalities had an estimated expenditure budget of R487.12bn to operate and deliver services. Of the R487.12bn, R262.9bn was allocated to metros. Intermediate cities received R105.3bn, local municipalities R83.2bn and district municipalities R35.6bn. Municipal entities had a separate budget amounting to R52.01bn. 

The municipalities racked up R4.74bn in fruitless and wasteful expenditure during the period under review. The estimated financial loss from noncompliance and fraud material irregularities was R5.19bn. In the 2022/23 financial year, only seven of Gauteng’s 11 municipalities received unqualified audit opinions. 

Maile said the province’s municipalities — with the exception of the metros of Johannesburg and Ekurhuleni and the Midvaal Local Municipality — had adopted unfunded budgets for the 2024/25 medium-term revenue expenditure framework [MTREF]: “This is problematic, especially as municipalities continue to budget for operational deficits over the 2024/25 MTREF period.” 

Maile said for the 2024/25 financial year, Gauteng municipalities had collectively budgeted for a surplus of R1.582bn, while the Lesedi and Midvaal local councils and Sedibeng district municipality had budgeted for operational deficits. 

“The clear indication is that municipalities continue to commit to unfunded service delivery initiatives.... It is evident that our municipalities must develop and improve on the revenue enhancement strategies [while] implementing austerity measures to ensure operations remain within the adopted budgets,” the Gauteng finance MEC said. 

A framework for budget funding plans had been developed by the Gauteng provincial treasury and the department continued to monitor the implementation of the budget plans by municipalities, Maile said. 

Gauteng provincial departments had allocated R846m to the province’s municipalities as part of capacity-building and support in HIV/Aids and primary healthcare projects, fire and rescue services, Expanded Public Work Programme, the development of mining towns and the Informal Settlement Upgrading Partnership.  

“The Gauteng provincial treasury remains deeply committed to ensuring that we strengthen the governance and financial management of our municipalities in order that they may be able to serve our communities,” said Maile. 

mkentanel@businesslive.co.za