Huge debt burden hits struggling municipalities

MUNICIPALITIES are facing mounting pressure as rates and tax debt has increased exponentially to R127.7 billion.

This has been compounded by the financial woes of struggling councils.

The increase in debt is also as a result of non-payment by households, businesses and the government.

Minister of Co-operative Governance and Traditional Affairs Nkosazana Dlamini Zuma told the National Council of Provinces yesterday that municipal debt had shot up to R127.7bn.

Municipal debt has been increasing very rapidly over the past 10 years; it was sitting at R45bn in 2010.

Earlier, national Treasury said most of the debt would not be recovered.

SA Local Government Association president Thembi Nkadimeng said some municipalities were in a dire situation because of the rising debt.

Dlamini Zuma said the impact of Covid-19 had led to the widening of municipal debt as many people had lost their jobs.

National Treasury and the SA Reserve Bank had said up to three million people would lose their jobs due to the epidemic’s impact on businesses across the country.

Dlamini Zuma said many households were struggling to pay for services and their rates.“This resulted in households owing over R127.7bn to municipalities at the end of the municipal financial year in June,” she said.

“Slowed business activities, tax evasion and inadequate collection systems resulted in a total debt of R181.3bn of which R28.9bn was owed by businesses and R18.1bn by government in all its spheres at the end of the municipal financial year.”

She said this has led to municipalities being unable to pay their creditors on time, and that at the end of the financial year municipalities owed creditors more than R53bn. Part of the debt was owed to Eskom, with municipalities owing R11bn.

Nkadimeng indicated that most of the money owed to municipalities would not be recovered.

“As it relates to debts owed to municipalities, it is a well-known fact that an average of 59% of municipal debtors are not recoverable; in 55 municipalities more than 80% cannot be recovered, and debt collection at 99 municipalities was more than 90 days old,” said Nkadimeng.

Deputy Minister of Finance David Masondo called on politicians to stop political interference in municipalities, especially in the awarding of tenders.

Masondo maintained that administrators were caught in an untenable situation where politicians got involved in administrative matters. He called on politicians to focus on their work and not meddle in the administrative operations of municipalities.

Dlamini Zuma also raised this matter, and said administrators got frustrated with the meddling of politicians in their affairs. She said political parties must resolve these issues.