Economist’s cautionary call on debt write-offs

Writing off residents’ debt in the City of Tshwane is not a good plan as it may promote a culture of nonpayment, according to economist Dawie Roodt.

This week, the Tshwane council passed a report to write off debt to residents who had applied to the city’s affordability committee.

Writing off debt a double-edged sword

“The moment you start writing off debt, you open the door wide. Two things happen when you start to forgive debt.

“Some will continue not paying their bills once the debt is removed and it also may encourage others to stop paying their bills,” he said.

Roodt said the city should lead by example and collect debt from big accounts, such as state departments. “They are playing with fire.

“If you go down this spiral it’s hard to get out of it,” he said.

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The Tshwane DA had called for the city to write off debt, but said it should be based on solid principles.

DA Tshwane caucus chair Jacqui Uys said this was the last financial report that was brought by the DA in the previous administration and the first step towards a reliable debtor’s book and increased debt collection percentage.

“There is no other way to lead the City of Tshwane to financial recovery other than aggressive debt collection. Those who can pay, must.

Uys says deal with Debtor’s book responsibly

“This is why Tshwane Ya Tima is such an important campaign.

“But the part of Tshwane Ya Tima that must not be forgotten is to help those who cannot pay to apply for free basic services and help those who can pay, but are struggling to come back into the payment net to contribute to the city in an affordable way,” she said.

The former Tshwane MMC of finance, Uys, said it was important for the new administration to continue the work that had begun to deal responsibly with the Debtors’ book.

Uys said the DA had already requested reports on writing off the debt of deceased estates and allowing beneficiaries to open up new accounts, writing off the debt of child-headed households and registering them on the indigent register and fast-tracking the indigent application process to utilise credit records, bank statements and South African Social Security Agency records for qualification.

Other reports included writing off water debt to Hammanskraal residents to allow them to start on a clean slate.

Plus, there is a report on policy change to allow officials to, by following accounting guidelines, write off debt older than three years when it is clear from credit records residents will not be able to service it.

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