KZN municipalities owed over R3 billion for services

Lack of services will negatively impact investment decisions, says business chamber

Debt owing to KwaZulu-Natal municipalities has skyrocketed to record levels, according to the South African Local Government Association (Salga).

The latest survey indicates that consumers owe provincial municipalities a combined debt of over R3 billion for water, electricity, rates and other services. The defaulters include households, businesses and government departments.

Outlining the state of local government in KZN ahead of the end of the 2024/25 municipal financial year ending in June 2024, Salga provincial chairperson Thami Ntuli said these types of debt were the hardest to collect and placed municipalities in a precarious financial position, forcing many of them to borrow from commercial banks to bridge their cashflows.

Ntuli said high interest rates had affected consumers' ability to service the municipal debts and had increased the cost of borrowing for municipalities.

“The timing of interest rate hikes could not have been worse for municipalities because it is compounded by a grave need to borrow money to cover the shortfall of non-payment by government, businesses, and households,” said Ntuli.

He said the strain on cashflow, and the added burden of higher interest rates impacted the ability of municipalities to provide services and pay their suppliers on time. The negative impact this had on service delivery also affects business confidence in the regions affected, he added.

“Businesses will only invest in or expand in a [particular] municipality when they are confident about the environment. Municipalities can only finance new water pipelines or electricity transformers when businesses grow,” he said.

Ntuli said the increase in Eskom tariffs were a huge blow to not only municipalities, but also to the entire economy. He said that year after year, the National Energy Regulator of South Africa (Nersa) approves high Eskom tariffs for bulk electricity, negatively impacting municipalities’ revenue. “Last financial year, Nersa approved an increase of 18,65%, and for the current financial year 2024/25 an increase of 12,74%.

“This will continue to drive the paying customers to off-grid solutions, which will end up leaving municipalities with poor and non-paying customers. This will cripple the already deteriorating revenue base of municipalities. This has been the case in the last five to 10 years, with the sharp increases from Eskom. This is evident in more municipalities falling into the Eskom debt trap, including some Metropolitan municipalities recently. The country’s economic growth is at its lowest, with very high inflation, and Eskom continuing to battle generational challenges; which negatively affects municipalities, businesses, and households,” he said.

The Pietermaritzburg and Midlands Chamber of Business (PMCB) concurred that business investment decisions were based on having reliable access to service delivery.

PMCB chief executive Melanie Veness said that businesses need — at a minimum — a secure supply of electricity and water at competitive tariffs; efficient waste removal; affordable property rates; navigable roads, and a safe environment in which to operate.

“It is imperative to create an enabling environment for business because it’s business that creates employment. When businesses thrive, the economy grows, more people are employed, property values escalate and the rate base increases, improving municipal revenue.

“The non-payment of services bills by consumers has a crippling effect on municipal finances and negatively impacts service delivery. There is no excuse for non-payment by government departments. Non-payment should result in disconnection for all consumers, including the government departments," she said.