Lekwa Municipality is grappling with the repayment of R272- million debt from Eskom, but the financial statements reflect that millions have been written off as bad debts.
Municipalities will always be accused of using the writing off of debts as a deliberate ploy to improve its financial ratios even though the liquidity position will not be improved.
This practice is laudable in principle though it will encourage irresponsible consumer conduct.
It is one way of bringing non- paying residents into the payment cycle, provided this is done properly.
This must be part of a well planned and properly executed credit control management exercise.
The municipality is warned against rewarding bad behaviour instead of improving its cash flow.
Management fails to provide a coherent and logical justification for why it wants to write off huge sums of money.
The Municipal Finance Management Act states that the municipality charges interest on arrears, except where council has granted exemptions, but the report to council always state millions are outstanding and will be silent on how long the debts have been outstanding.
This is compounded by the fact that they had been unable to collect outstanding debts within a prescribed time.
This results in consumers being unable to enter into affordable repayment terms due to large arrears.
Arrangement plans are not affordable.
“Restraint on Transfer of Property” prohibits the Registrar of Deeds to transfer property ownership unless the municipality has certified that all monies due during the two years preceding the clearance application date have been paid in full.
It also stipulates that an amount due for municipal services, property rates and other taxes is a charge upon the property, and the municipality should use this provision to ensure they collect outstanding debt timely from owners.
Outstanding debt on the property that is older than the two year period the municipality must endorse the revenue clearance certificate to confirm that there is debt older than the two year period and that the new owner will inherit the debt.
National Treasury advised municipalities in the build-up to the 2016 local government elections to ensure financial sustainability more than ever before, so that municipal finances and service delivery is achieved beyond the election period, and that municipalities should refrain from suspending credit control and debt collection in a bid to win votes.
There is a high level of unemployment and poverty in the municipal area, some households are unable to pay for basic municipal services.
The Indigent Register must be updated annually.
Version 2.8 incorporates changes in the 2016/17 municipal budget to include the cost of free basic services.
In a case of misrepresentation of the subsidy conditions, it will have to be withdrawn with immediate effect and not be reconsidered for a period of at least 12 months.
No subsidies to owners with more than one property, whether such property is situated inside or outside Lekwa.
Sonwabile Luwaca, Standerton.
