Gauteng municipalities are owed more than R58bn in unpaid debt

More than 85% of the outstanding debt owed to municipalities in Gauteng is from household customers and represents R49.8bn.

The total debt is R58.3bn, leaving municipalities with limited funds to spend on new projects and maintenance of existing infrastructure.

These were some of the findings in a report by an independent committee of inquiry commissioned by Gauteng cooperative governance and traditional affairs (Cogta) MEC Lebogang Maile in August 2019.

The committee found the performance of municipalities sharply declined when there was political instability in areas.

It also raised concern about government debt owed to municipalities. As at June 2020 the total debt owed by the Gauteng government to its municipalities was R876m. Of this sum,  21% was owed to local municipalities and the remainder to metropolitan municipalities.

Emfuleni municipality has been unable to provide clean drinking water to customers, leading to the national water and sanitation department taking over the provision of water in the area.

In its findings, the report called for greater monitoring and proper contract management.

Tender problems were not the only red flag picked up by the inquiry. The report found most municipalities had little or no internally funded capital budgets, while a number of them faced challenges with revenue collection.

It said instability at municipalities stemmed from a disregard for the Local Government Municipal Systems Act, the Municipal Finance Management Act and a relative lack of adherence to the National Treasury’s policies and guidance.

In Johannesburg, the slow clearing of suspense accounts and resolution of customer queries was of concern.

The report said inconsistent billing was noted in many local municipalities.

“In Emfuleni, unregistered housing developments cannot be billed. In Merafong City, some properties are not classified on the valuation roll. Some meters cannot be located or were replaced with prepaid meters, yet bills continue to be issued,” the report said.

Revenue collection by implementing credit control policies in local municipalities was largely dependent on outsourced services for debt collection.

“This has led to a loss of critical skills in revenue departments in municipalities. Should this function be brought in-house, consideration should be given to human resource capability.”

The report stated gains made in revenue collection across many of the municipalities were eroded by the growing debt reality.

“The situation is worsening and requires urgent resolution. A significant 75% of revenue collected across local municipalities is realised from suburbs and business, including large power users, and government.”

The report states in many instances the effectiveness of external service providers to improve revenue and collect on old debt is questionable.

It found that annual salary increases for employees in the light of growing financial unviability was unaffordable for municipalities.

"This requires a review of central bargaining determinations, and the processes itself towards determination need to be considered.”

The report recommended that the Gauteng treasury and Cogta engage with municipalities early in the budget cycle to establish the key indicators of the next budget  so the draft IDP and budget adopted by council in March each year was a funded budget.

Cogta provincial spokesperson Castro Ngobese referred TimesLIVE to provincial spokesperson Vuyo Mhaga for comment, saying the report was a cabinet report.

Mhaga could not respond about what the provincial government would do to implement some of the committee's recommendations and findings.

“This report hasn't been presented to cabinet yet,” Mhaga said.

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