Political suicide? Dilemma of recouping historic debt in municipalities

Making a U-turn on historic debt inherited by municipalities wasn’t impossible, says political analyst Dr Fikile Vilakazi, but recouping the debt may exert pressure on voters.

“It becomes political suicide because you will have to institute processes on voters to pay back money they have shown no interest in paying. It becomes a difficult exercise,” he said.

Vilakazi said most office bearers were politically appointed and chose not to exert the necessary pressure on people or the municipality, so the historical debt continued to grow.

“If they wanted to reduce the historic debt, in an area where communities are known not to pay for services, they could install prepaid meters and allow them the ratio of free water and electricity for the month, and the rest of the month they [should] have to pay for it,” he said.

City of Tshwane mayor Cilliers Brink updated the media on the city’s financial status on his 100th day in office this week.

He said it was no secret the city faced significant financial challenges and the PEU smart meters VAT liability had contributed to the city’s debt.

In June 2013, the city entered into a contract with PEU/Tums (Total Utility Management Services) for the provision and management of smart meters which was later terminated after the High Court in Pretoria declared the agreement unlawful.

“In May 2022, when the current MMC for finance, Peter Sutton, reviewed the city’s finances, he unearthed this liability and questioned how it reflected in the financial statements,” he said.

Brink said this liability had not been reflected correctly in the financial statements for years and while the city effectively collected the R2.9 billion in tax, this was not paid over but rather spent on day-to-day operations.

“When Sars [SA Revenue Service] made their demands, the city did not have this money in its coffers and entered into a payment arrangement of R91 million per month – and have paid approximately R2.2 billion to Sars,” he said.

“We are not in denial about our difficult financial situation, nor do we deny we have an obligation to pay Eskom and other creditors such as Rand Water.

“Eskom has taken legal action against the city by filing a founding affidavit before the High Court in Pretoria. Eskom seeks a ruling to force the city to immediately pay an outstanding debt of more than R1 608 million.”

Brink said the city had filed an answering affidavit defending the matter and expected a full hearing by mid-July.

“I want to emphasise that the water shortages experienced in the city have nothing to do with credit control or restrictions by Rand Water. They relate purely to infrastructure challenges on the side of the water utility,” he said.

Brink said from the middle of June, more than 100 teams had been deployed in Tshwane to disconnect arrears debtors on accounts of R50 000 or more.

Rand Water’s chief executive Sipho Mosai and chair Ramateu Monyokolo said the debt by municipalities not only affected the operation of its infrastructure, which meant they could not guarantee bulk water provision to them, but also maintenance, refurbishment and augmentation.