Households would rather pay their cellphone and TV bills than local government rates and levies because they know they are unlikely to get cut off from government services.
This is according to Eyal Shevel, head of corporate and public sector ratings at ratings agency Global Credit Ratings, speaking about National Treasury’s recent fourth quarter report on local government revenue and expenditure.
The report states that the largest portion of consumer debt in local government relates to households, which accounts for 65.2% or R74 billion, up from third quarter figures of 61.6% or R66.9 billion respectively. “When times are tough, households tend to push off settling their rates and levies first,” Shevel says.
“They would rather pay off cellphone and TV bills, as there are greater short-term consequences, before they pay their local government.”
Shevel says this is partly due to stronger enforcement of debt in the private sector, as cellphone services would simply be cut off if a bill had not been paid.
“Households recognise that they are unlikely to get cut off from local government services if they don’t pay their bills, at least in the short-term,” says Shevel.
According to the report, the City of Joburg is owed the largest amount at R16.1 billion (R13.3 billion in third quarter). This is followed by Ekurhuleni Metro at R11.7 billion (R11.6 billion in third quarter), City of Tshwane at R7.6 billion (R7.1 billion in third quarter) and Cape Town at R7.3 billion (R7.4 billion in third quarter).
“All municipalities need to demonstrate that they have the political will to enforce debts, while also ensuring they make it easy for households to pay their bills or settle billing disputes.” Shevel says.
Municipalities need to view themselves as service providers and take a customer-centric approach. Practical measures include ensuring all invoices are correct and that when a resident has a dispute it is dealt with quickly and efficiently by a call centre.
“The Cape Town and eThekwini municipalities demonstrated relatively low levels of household debt because they have been more effective at managing the services aspects, while at the same time strictly enforcing debt and cutting off services to those who haven’t paid their bills,” he says.
Another factor that may have resulted in rising consumer debt levels is the recent local government elections. “There is perhaps a possibility that enforcement of debt was avoided in order to appease voters, especially in the smaller municipalities,” says Shevel.