Debt owed to municipalities by households soars to R127.7bn

As the Covid-19 economic crash looks set to worsen, cash-strapped consumers owe South Africa’s municipalities more than R120 billion.

At the end of 2019-20 financial year in June, households, struggling to survive, owe municipalities more than R127.7 billion.

Slowed business activities, tax evasion and inadequate collection systems resulted in a total debt of R181.3 billion, of which R28.9 billion was owed by businesses and R18.1 billion by government in all its spheres, at the end of the municipal financial year.

On Tuesday, Cooperative Governance and Traditional Affairs (Cogta) Minisiter Nkosazana Dlamini-Zuma revealed these figures during an address to the National Council of Provinces’ annual local government debate.

“This weighed on municipal creditors, with municipalities paying them at an average of 180 days, as opposed to the 30-day government policy. At year-end the municipalities owed over R53 billion to creditors, of which about R11.3 billion was owed to Eskom and R6.24 billion was being owed to water boards.

“This is compounded by leakages in the system which have cost the state over R9.9 billion in lost water revenue and R10.2 billion in electricity losses. These are partially as a result of little or no budgeting for maintenance, which has been at times accompanied by huge under-expenditure in grants directed at building and augmenting infrastructure,” Dlamini-Zuma said.

She said municipalities with the least capacity, which tend to be in most need, are the ones that underspend.

“The municipalities that tend to lack on service delivery are also often those that have low revenue streams, with many of the citizens living in poverty and with little income. We must therefore use this year’s local government week to evaluate whether the current funding formula and make-up of our municipalities are appropriate to advance us towards a better life for all.”

Dlamini-Zuma also said the Auditor General’s report showed that 43% of the country’s municipalities had received an unqualified audit outcome, with only 11% of them receiving no negative findings.

The AG also reported that 28 municipalities had not submitted their reports on time, while 91% of municipalities did not comply with legislation, “pointing to a lapse in oversight and the lack of controls, particularly as it relates to supply chain management and procurement”.

Thembi Nkadimeng, president of the South African Local Government Association, said a key outcome of the 2016 municipal elections was that two-thirds of the elected councillors were new in the job.

“This huge change of leadership resulted in a loss of institutional memory and imposed on the sector a need for escalated induction, training and capacity building programs. Despite numerous interventions to increase the capacity of councillors in the first four years of the term of office, the gaps are blatant and the recent developments around Covid-19 have further exposed serious weaknesses in the leadership of many councillors,” Nkadimeng said.