Salga’s Jean de la Harpe on the small municipalities in ICU
Debt spiral and pricey electricity are breaking smaller municipalities
● Municipal debt is “ballooning uncontrollably” and service delivery failures are going to get worse, says Jean de la Harpe, executive director of municipal infrastructure services at the South African Local Government Association (Salga).
“It is actually going to destroy our entire service delivery system,” she says.
The auditor-general has for years flagged it as a national crisis and the government says there are plans to deal with it, but the number of municipalities being sucked into a hopeless “debt spiral” is growing.
At Salga’s annual national assembly of members in December, co-operative governance & traditional affairs minister Zweli Mkhize repeated the refrain that plans were in place to deal with municipal debt, but De la Harpe doesn’t sound convinced.
“Many things have been tried in the past, and they haven’t worked. So we really do have to come up with very serious and workable solutions.”
Debt write-offs for municipalities that are financially unviable are essential. This category includes “almost all rural municipalities”, she says.
“These municipalities are in ICU and we really need to find a joint solution with the National Treasury and the department of cooperative governance & traditional affairs.
“We can’t carry on having them incur more and more debt, which we know they’re never going to be able to repay. We have to put an end to the crisis and come up with solutions.”
Salga is working closely with the department of co-operative governance & traditional affairs on financial recovery plans, she says.
“We’re also advocating for Eskom [to which the municipalities owe R17bn] to offer incentives, such as putting a hold on interest charges for those municipalities that can pay to start paying off their debt.”
Salga and the National Treasury are helping them to enter into payment agreements that they can stick to and honour.
Municipalities have consistently reneged on such payment agreements in the past, but De la Harpe says Eskom has been screwing them. “Eskom has been charging interest on debt that was prime plus 5%. All parties have agreed that that was not reasonable.”
Eskom says it is losing millions every month as a result of concessions negotiated by Salga, the department and the Treasury.
“This is because they’ve been overcharging on the interest, charging municipalities interest from the 16th of the month and not the 30th of the month,” she says.
There have also been a lot of penalties for exceeding what is called maximum demand, although a municipality cannot alter its notified maximum demand until it has paid off its debt.
“So you find many of these small municipalities are in a very vicious circle because they’re unable to pay off their debt, meaning they’re not able to alter their notified maximum demand, meaning that they’re penalised every single month of the year.”
Salga is pushing for municipalities to be allowed to reduce their dependence on Eskom.
“We’re saying we need to look at other forms of energy, and we need to restructure the entire energy industry.”
Municipalities must be able to access energy at the lowest cost, independently of Eskom, directly from independent power producers (IPPs).
Salga has taken a decision to support the Cape Town metro, which has initiated legal action against the department of energy and the National Energy Regulator of SA, demanding the right of the city to purchase electricity directly from IPPs.
The price of electricity from new wind and solar photovoltaic IPP projects is now lower than Eskom’s average cost of electricity supply, and significantly lower than Eskom’s price of electricity to municipal electricity distributors.
This cost differential will increase significantly in the years ahead, leading to substantial savings for municipalities.
But given their demonstrable incompetence, surely the notion of municipalities other than big metros managing their own energy requirements this way is laughable?
This is why Salga has been pushing for greater professionalism of local government, says De la Harpe.
With a spectacular lack of success.
“You can’t have one institution on its own with limited resources trying to solve what is a massive problem,” she explains.
National government departments such as the department of co-operative governance & traditional affairs and the Treasury need to be far more closely involved, as has only recently begun to happen in an interministerial task team.
Since minister Mkhize replaced Des van Rooyen at co-operative governance & traditional affairs, “there’s been a lot more energy and real action happening in that [task team]”, she says.
Salga is advocating for a “professionalisation framework” to ensure that more competent people are appointed to municipalities.
This means ending cadre deployment, she says.
“We do not want people employed in jobs because of political or other connections. We’re saying anybody going into any job in a municipality must have the competence, skills and experience for that job.”
Salga supports greater private sector involvement, “but we have to be a bit careful because we represent municipalities so we can’t suggest anything that might be usurping the authority of our members”, she says.
“But in my directorate of infrastructure we are encouraging municipalities to look at their delivery models, and whatever is going to give the most sustainable, affordable, best service to the consumer is what we believe should be pursued, whether that means using the private sector or not.”
There is a need for partnerships with the private sector to be better managed, and this is where government departments need to offer far more assistance than they have.
“We can’t all stand aside and continue to watch service delivery failing. The whole of government must step in.”
She says Salga is looking at an “accountability and consequences framework” that will hold local government accountable.
The final draft of a document to this effect has come out “and we’re hoping to convert this into policy and legislation”.
Corrupt municipal officials need to be criminally charged, she says.
But in spite of Salga making the right noises, municipalities are only getting worse. The question is why.
“You need strong political leadership at all levels, and zero tolerance for corruption.”
You find many of these small municipalities are in a very vicious circle … penalised [by Eskom] every single month of the year