Joburg to write off more debt – mayor

Johannesburg is looking to scrap another significant chunk of debt owed to it in the coming weeks, mayor Dr Mpho Phalatse has said.

Phalatse was speaking as part of a panel focusing on the urban regeneration and sustainability of African cities at the ninth annual Southern Africa Europe CEO Dialogue in Melrose Arch last week, where the availability of funding for cities came into sharp focus.

While Phalatse did not reveal the exact value of the write-off, her comments come at a time when the city’s finances and service delivery capacity are coming under further strain.

She said the city already had to scrap “billions of rands in debt” from its book over the past two years as a result of the culture of nonpayment of rates and taxes, among other reasons.

Although nonpayment is a huge contributing factor to the city’s inability to meet its monthly revenue collection targets of about R4 billion more consistently, according to Phalatse, there are also more politically driven factors behind its revenue shortfalls.

“[It’s] not always due to low capacity [to] pay [rates and taxes], but just behavioural issues that need to be managed, including the culture of entitlement [and] political promises that are unrealistic that people are holding on to,” she said.

“Those are all the things that we are having to deal with to improve our revenue collection.”

Mayoral spokesperson Mabine Seabe told Moneyweb the city could not disclose the exact amount of money it has had to – and is looking to – scrap off its books “as the report still needs to be served before council at the ordinary meeting of 23 and 24 November”.

However, Seabe shared a list of criteria that gives the mayor guidelines on which debt can and cannot be written off.

The city said its credit control and debt collection policy allowed for debt to be scrapped if it was deemed irrecoverable. To qualify as such, one or more of the following must be true:

No payment of outstanding debt is secured after exhausting all legal recourse;

Long-outstanding debt amount equal to or less than R500;

The success of future legal action to recoup the outstanding debt is [believed to be] compromised;

The costs of legal action is [likely to be] higher than the value of the outstanding debt;

A company has been deregistered or is dormant and has no assets of value to attach.

The debtor is untraceable or cannot be identified;

The debtor has emigrated, leaving no assets of value to cost-effectively recover the debt.