Cape Town - Money owed to municipalities across the country for services provided to consumers has increased to a staggering R294.7 billion and not all of it is realistically collectible, the National Treasury has said.
Treasury released the local government revenue and expenditure report on Monday for the third quarter of the 2022/23 financial year.
It covered a nine-month period from July, 2022 to March 31, 2023.
The report is part of the “In-year Management, Monitoring and Reporting System for Local Government (IYM)”, which enables the provincial and national governments to exercise oversight over municipalities and identify possible challenges in implementing municipal budgets and conditional grants.
According to the report, the money owed by consumers spiked in the third quarter compared to the same period in the 2021/22 financial year.
Government institutions accounted for R18.7bn of the total amount owed by debtors.
But households remain the highest contributors (72.8%) of debt owed to municipalities at R214.4bn, compared to R173.6bn in the third quarter of the previous financial year.
Gauteng had the highest consumer debt, with its municipalities owing R95.2bn.
“Included in the outstanding debt is an amount of R252.8bn, which is a debt older than 90 days – historic debt that has accumulated over an extended period, interest on arrears, and other recoveries which may not be realistically collectable by municipalities.
“If the consumer debt is limited to below 90 days, then the actual realistically collectable amount is estimated at R41.9bn.
“This should not be interpreted that the National Treasury by implication suggests that the balance must be written-off by municipalities, but the municipality must consistently implement its credit control and debt-collection policies,” Treasury said.
Chief economist at Stellenbosch University’s Bureau for Economic Research, Hugo Pienaar, said: “The first point is perhaps to say that for many years, there has been a culture of non-payment for services in communities across the country.
“With ratepayers now being squeezed by an increased cost of living (higher inflation and interest rates), this probably made many households even less willing, but also in many cases unable to pay for municipal services.”
The report also showed that municipalities in turn owed their creditors R85.7bn as of March.
Provinces with the highest outstanding municipal creditors that were greater than 90 days include the Free State, Mpumalanga, the Northern Cape and North West.
“An increase in outstanding creditors could be an indication that municipalities are experiencing liquidity and cash challenges, and consequently are delaying the settlement of their outstanding debt owed,” said Treasury.
According to the budgeted monthly operational and capital expenditure submitted by all municipalities to the adjusted budgets, municipalities recorded an over-performance of R895 million on revenue collection, an under-performance of R43.1bn on operational expenditure and underperformance of R18.4bn on capital expenditure.
Cape Times