Consumers owe the City of Ekurhuleni (CoE) a combined debt of over R25b for rates and services.
This, according to the MMC of Finance, places the city in a precarious financial position, which could result in an inability to pay service providers and salaries, impacting the provision of service delivery.
The city’s finance department revealed most of these debts are long overdue.
It further admitted the huge shortfall of non-payment by some households and businesses has taken a toll on service delivery and public infrastructure maintenance.
Owing to the escalating culture of non-payment, the city has embarked on a mission to recover debt and boost its reserves.
It has activated its credit control policy and introduced some measures aimed at recovering debt and heightening the culture of paying for services among residents.
Watch the full interview with the MMC here:
Speaking during a stakeholder engagement meeting with Caxton Local Media on August 6, the newly appointed finance MMC, Jongizizwe Dlabathi, said the city needed to take this course of action to dodge a situation in which it becomes unable to fulfil its obligations, including rendering services and maintaining infrastructure.
Cash in hand
The latest financial reports paint a grim picture of the city’s finances.
If collections don’t improve, the city might battle to service its account to service providers on time.
The quarterly reports indicated that in the fourth quarter (last quarter of the 2023/24 financial year) the city had 11 days of cash in hand, which is way below the national treasury norm of at least 30 days.
What the current 11 days cash in hand means that when those who owe money for municipal services and rates fail to pay or in a situation where there is not enough payment coming into the city’s coffers from residents, the money available in the reserves is only enough to sustain the city for 11 days before it collapses or unable to pay service providers, staff, and render services to the public.
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While the city has not confirmed this, if information gathered from well-placed sources is anything to go by, the total amount of money currently in the city’s reserve is just below R600m.
This represents an increase from when cash in hand hit an all-time low, below R440m by the end of the fourth quarter of the 2022/23 financial year.
The R440m represented about two weeks’ cash in hand.
However, an insider told the Advertiser that this increase is not something to celebrate because a rising debt to service providers, including Eskom and Rand Water shadows it.
Poor collection
Outlining the state of the city’s finances, Dlabathi said the total debt owed to the city by defaulting households was R20b, while debt by businesses was over R5b.
He explained how this lack of payment is affecting the city’s revenue base and its ability to provide and expand sustainable basic services.
“The city could not collect enough revenue, and this means that we will struggle to fully service our current obligations,” warned Dlabathi.
“While we continue to provide services, such as water, electricity, sanitation and waste collection, I must admit there are instances where we cannot fulfil the obligations on time.
“That is why we have made it our priority to focus on revenue recovery to bring back a strong financial position for the city.
“While we understand the factors affecting consumers’ ability to service their municipal debts, the reality is there is a lot of money that is owed to the city. We must admit many people, particularly in our townships, are not paying for services in a manner that they should.
“Our message is that those in a position to pay their account fully should continue doing so, and we expect those with challenges with their disposable income to make a monthly contribution towards the services they receive.
“Those contributions will help us pay service providers like Eskom and Rand Water on time to have enough electricity and water to distribute to all our customers.”
Lack of implementation
The former finance MMC in Ekurhuleni, Fanyana Nkosi, who now serves as the DA spokesperson for finance in the city, also weighed in on the MMC’s efforts to reinvigorate debt collection measures.
Nkosi said while they support and applaud the MMC’s efforts to resuscitate the city’s finances, “The main problem the city has is not the lack of revenue and debt collection strategies or policies, it is a lack of implementation by those entrusted with the responsibilities.”
He pointed out that some of these strategies were introduced during his tenure as MMC, but were somehow not followed through after the DA left office.
“It is good that he has reintroduced some of these strategies because the non-payment of service bills by consumers has a crippling effect on the city’s finances and negatively impacts service delivery.
“It will, however, be pointless having these revenue collection measures if not implemented properly.
“We have been calling for strategic moves to save the city from its worsening financial situation, besieged by low cash flows and rising debt to service providers.”
Nkosi stated the lack of residents’ inclinations to pay for municipal services was left unattended for a very long time, and has created a sense of entitlement and a culture of ‘free, free’.
“It is time the residents understand nothing comes free. With these measures in place, we decided to give the new MMC the benefit of the doubt and will be able to see the results of his work when we get the quarterly reports later this year.“
He suggested the city also deals with officials and service providers allegedly engaging in shenanigans and malpractices, including colluding with non-payers and electricity thieves.
“Non-payment should result in disconnection for all consumers.
Dlabathi said a team of officials and officers have been assigned to follow through and ensure that the efforts yield the intended results, protecting the city’s revenue.
Debt recovery mission
On account of the prevailing financial woes, the city is implementing the following measures:
• Amongst others, the city has launched a weekly operation targeting those consuming water and electricity for free, particularly hijacked buildings in the CBDs. The city is also investigating holding the hijacked property owners to account for or risk of having their properties forfeited to the city and ultimately repurposed.
• The city aims to introduce a range of activities and campaigns aimed at creating a culture of payment among consumers of services. These initiatives will consist of early warning systems to remind account holders to service their accounts.
• To ensure that household consumers with no or lower income are accommodated, but also making sure the city is not financially overstretched, those who have a challenge with their account can take advantage of the once-off debt rehabilitation and incentive scheme. These debt relief programmes include off-setting the interest on the account; giving up to 50% discount and subjecting the account holder to a payment arrangement; giving 75% debt write-off on the portion of a debt that is 120 days and above old; and continuing providing the indigent grant for the most vulnerable members of the community.
• Over and above the normal collections, to enhance revenue, the city is also looking at leasing and disposing of some of its assets to the private sector. These processes will include reviewing some policies that it believes are inhibiting public-private partnerships and investment. These policies include the lease policy that says the city can lease a portion of land or property for nine years and 11 months.
The MMC pointed out that some investors bring a lot of capital injection and it might be impractical for them to break even within the almost 10-year period. He proposed a reasonable period of a minimum of 20 years to attract the private sector to invest in the city.
“It is imperative to create an enabling environment for investors because it creates employment. When businesses thrive, the economy grows, more people are employed, property values escalate and the rate base increases, thus improving municipal revenue.”
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