Debt owed to municipalities increases by R10bn

THE OUTSTANDING debt owed to South Africa’s municipalities grew by R10.2 billion between the end of March, when the country went into lockdown in response to the Covid-19 crisis, and the end of June, according to a report released by National Treasury yesterday.

The treasury said the country’s municipalities were collectively owed R191.5 billion for services but could realistically hope to recover less than a fifth of the money.

About R14.8 billion, or 7.7% of the debt, is outstanding from government entities.

However, the biggest component of the debt is due from households who owed their local councils a total of R133.9 billion, at the end of June when the fourth quarter of the financial year for municipalities closed.

The total debt owed to municipalities stood at R181.3 billion at the end of March.

“It needs to be acknowledged that not all the outstanding debt of R191.5 billion is realistically collectable, as these amounts are inclusive of debt older than 90 days (historic debt that has accumulated over an extended period), interest on arrears and other recoveries,” the treasury said in a statement.

“If consumer debt is limited to below 90 days, then the actual realistically collectable amount is estimated at R33.4 billion. “

Treasury said this caution should not be taken as a suggestion that the balance must be written off by municipalities.

The country’s metropolitan municipalities are owed the lion’s share of the debt, at R102.3 billion. Top of the list is the City of Johannesburg, which is owed R31.1 billion, followed by Ekurhuleni with R16.4 billion, Tshwane with R16.2 billion and ethekwini with R13.5 billion.

Yesterday’s report marks the first time that the municipal financial year report is compiled by using figures from the Municipal Standard

Chart of Account (MSCOA) data strings.

The MSCOA regulations seek to ensure the standardisation of municipal budgeting and accounting.

But the treasury raised concerns about the credibility of the information fed into the system by municipal officials, and said incorrect accounting practices were at the heart of the problem.

The financial report showed that collectively, municipalities spent only 79.9% or R384.3 billion of the total adjusted expenditure budget by June 30.