Municipalities owed R13.5bn
KWAZULU-Natal municipalities were owed a whopping R13.5 billion at the end of June with the largest portion of outstanding debt, R8.2 billion, owed by the household customer group, said Finance MEC, Belinda Scott yesterday.
She was presenting her close-out report on the municipal finance fourth-quarter review at the KwaZulu-Natal legislature.
Scott said the secondlargest portion of outstanding debtors was commercial, which owed R3.8 billion, while organs of state owed R790.6 million.
She was concerned that municipalities were not spending their conditional grants (money transferred for a specific purpose that may not be used for any other project).
During the 2015/16 financial year, 46 of the 61 reporting municipalities submitted rollover motivations to the National Treasury in respect of those grants for the 2014/15 financial year. For 2010/11 to 2014/15, R1.7 billion in unspent conditional grants was surrendered to the National Revenue Fund.
Treasury officials had since engaged with municipalities and offered direction and support on the preparation of rollover motivations. The money could have been used by the municipalities to develop infrastructure and provide essential services. Instead, it was lost to the province.
Backlogs
“The failure to fully or appropriately use conditional grants negatively impacts on the development of infrastructure and exacerbates the current backlogs, impeding economic growth and the provision of service delivery by municipalities.
“It therefore becomes essential that municipalities engage in proper management of conditional grant funding and strictly adhere to the requirements regarding reporting, as well as the submission of motivation for roll-over.”
Scott said that while a positive cash balance was a good indicator, a major challenge facing municipalities was to ensure there was sufficient cash available to cover fixed monthly commitments.
The Treasury’s analysis showed only 25 municipalities had a cash ratio of three months or greater; for 27 it was between zero and less than three months, and for nine, it was less than zero.
Scott said a significant number of municipalities had unhealthy cash positions and cash flow management. The increasing of rates and tariffs and slow recovery of the economy had negatively affected consumers’ ability to pay for rates and services. This had resulted in a deterioration in revenue collections.
“There is no reason why we cannot change the spending and reporting patterns of municipalities to deliver services efficiently and economically,” she said.
The report was not debated.