Municipalities will always be accused of using the writing off of debts as a deliberate ploy to improve its financial ratios even though this would hurt its liquidity.
Lekwa wrote off an amount of R431 870 101 in the financial year ending 30 June 2015 (2014/15) and 2013-14 R347 219 826 which represents 89%, (2013-14: 86%) of the total consumer debtors.
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.
The reality is that the practice will improve the financial ratios of the council, but the liquidity position will not be improved.
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 states 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 is 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 timeously from owners.
With 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 are 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.
Indigent relief should be budgeted for and an indigent register must be updated annually.
The municipality has the right to disclose a list of indigents for public inspection.
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.
An e-mail was sent to Ms Thobeka Mtshiselwa, communications manager of the Lekwa Municipality, on 9 December, but at the time of going to press no feedback was received.
