Pay municipal debts, government departments told

Municipalities have welcomed the national government’s decision to force state departments to pay their debts by docking the amounts owed from their budget equitable share.

South African Local Government Association (Salga) spokesperson, Sivuyile Mbambato, said the announcement was in line with what the association had been advocating for many years.

Mbambato said focus had always been on debt of the municipalities to Eskom, while the monies owed by the government departments to municipalities were not given attention.

‘Nowhere to hide’: Move to force state departments to pay municipal debts

“This announcement should be welcomed, it’s what Salga had been advocating for,” Mbambato said.

He was reacting to Deputy President Paul Mashatile, who announced in the National Council of Provinces on Thursday that part of the departments’ equitable share would be withheld as they seek to ensure they settle their municipal debts.

This meant the departments which included state-owned enterprises would have nowhere to hide as the National Treasury will come knocking on their doors to force them to pay up.

Mashatile was responding to a question for oral reply from ANC MP Mapule Dhlamini, who had asked him whether government had considered developing mechanisms to address the growing intergovernmental debt that had a negative impact on the delivery of reliable services to communities.

What does the debt management process entail?

In terms of the new arrangement, the departmental allocations would be given minus the money owed to the municipality.

This is permitted in terms of the Municipal Finance Management Act that enforces a debt management process through a combination of the municipal debt relief conditions, including municipalities deducting it from the municipal bill payment at point of service.

Docking funds from equitable share to service debts

Mashatile said the government was taking action to ensure the question of intergovernmental debt was addressed and this included docking funds from the departments’ equitable share to service their debts to the municipalities.

Knock-on effect: Govt departments owe municipalities R29bn

Government departments owed municipalities approximately R29 billion as of November.

This debt is said to be the cause of many municipalities’ struggles to pay their own debts to power utility Eskom and water boards.

At the end of March 2023, municipalities that owed Eskom as of March 31 could apply for municipal debt relief from the National Treasury.

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‘Top-slicing budgets of departments to settle debts’ – Mashatile

“National Treasury will also consider top-slicing budgets of departments that owe municipalities in order to settle debt. We will continue to implement these and other measures to eliminate the challenge of intergovernmental debt and to improve the delivery of services to our communities,” Mashatile said.

He said the departments owing money to municipalities and whether it was among themselves must pay the monies owed within 30 days of the submission of an invoice, or on a specific period agreed with creditors or suppliers.

Intergovernmental debt hampers service delivery

Mashatile said intergovernmental debt was a challenge which hampered government efforts to deliver services, particularly at local government level.

As part of revenue support initiatives, the National Treasury is strengthening the existing budget funding methodology to improve the budget processes of municipalities.

“Furthermore, the National Treasury is enforcing the implementation of Section 216 (1) of the constitution by withholding the Local Government Equitable Share and other conditional grants for persistent municipal failure, including nonpayment of bulk suppliers and third parties,” Mashatile said.

Debt owed to water boards

He said a similar debt relief arrangement was planned for the Department of Water and Sanitation for debt owed to water boards, water user associations and municipalities that are Water Service Authorities.

The Department of Cooperative Governance and Traditional Affairs would consult all directors-general and heads of departments to instruct them to provide plans to settle municipal debts.

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