R300m WRITTEN OFF Prepaid to be used to settle accounts
WHILE the Sol Plaatje City Council has written off around R300 million in bad debts in two months, local residents who are in arrears are likely to see a large percentage of their prepaid electricity purchases going towards settling their outstanding amounts.
According to the original proposal, the municipality will retain 50% of money for all non-indigent customers and 30% for indigent customers every time they make a purchase of prepaid electricity.
This amount will be credited against the debtor’s account in lieu of the amount outstanding on their accounts.
At yesterday’s monthly Finance Committee meeting, however, it was suggested that the percentage be implemented in incremental stages, starting at 30% for non-indigents and 20% for indigents.
The municipality is in the throes of implementing a strict credit control policy and at the end of last year, the local authority appointed New Integrated Credit Solutions (NICS) as its debt collection agent.
On the recommendation of NICS, the municipality also wrote off around R300 million in bad debt in December last year and January this year.
The bad debt written off includes the accounts of indigents (where R86 million was written off) and those of deceased residents (R204.96 million).
Others are liquidated, sequestrated or insolvent accounts, people who have immigrated or businesses that have deregistered.
According to a report submitted at the meeting, bad debt must be written off regularly, at least once every three months.
Debt is written off in situations where the municipality has exhausted all means of debt recovery and no possible and practical means of recovering the debt exists.
Meanwhile in a report on the municipality’s debt action plan, it was pointed out that the liquidity of the municipality was dependent on the collection rate being not less than 85% over 12 months.
“For the first time since the 2011 administration, the cash receipts were less than the cash payments, meaning that the operations generated a deficit. This is not a healthy situation and if it continues, sustainability and eventually the going concern ability of the municipality will be tested,” the report states.
According to the report, the underlying cause is a lower than projected collection rate.
In terms of indigent accounts, it was pointed out that indigent households have their debt written off upon approval of the application.
Application
“Once the application has been approved, the beneficiaries qualify for free basic services to the maximum determined in the policy.”
Only property rates, which range from R86 to R170, are not covered as part of the free basic services.
Indigents are billed on a flat consumption of 9kl of water per month, of which 6kl are free. They are therefore billed for 3kl of water on their monthly statements.
All indigent households are installed with a prepaid electricity meter. As a result, indigent households accumulate debt as a result of non-payment of monthly rates billed and excessive water consumption.
“Over a period of time, indigents accumulate excessive debt and this cannot be written off as a write-off already took place at the date of approval.”
The municipality is entitled to apply its credit control and debt collection policy on indigent households, however, the indigent policy provides for temporary suspension of credit control procedure on indigent households during bereavements and related circumstances.
“This means that even if the indigent has the meter suspended for the purchase of electricity as a result on non-payment of account, the suspension can be removed if there is a bereavement.”
The proposed action plan is an awareness campaign that will be rolled out through various mediums.
Other debt control measure include monitoring all accounts after the closing date and issuing reminders to customers who have missed the due date by issuing SMSs and notices. Customers will be given seven days to make a payment or report at Credit Control for a postponement of due date or to make an arrangement.
Failing this a request to block or suspend the prepaid electricity meter will be issued immediately. Customers will not be able to purchase electricity and will be forced to sign a debt acknowledgement contract and debt settlement contract.
Actions will also be instituted against account holders for recovery of all arrear amounts. A proportion of the pre-paid payment will be made to other debts and debtors information will be issued to a credit bureau.
Customers in arrears for more than 90 days and who are using conventional meters will have their meters replaced with a prepaid electricity meter.