Total consumer debt owed to municipalities soared about R80bn over one year to reach R386.5bn by the end of September, figures released on Friday by National Treasury showed.
In the first quarter of 2023/24, consumer debt amounted to R306.7bn, according to a Treasury statement on local government revenue and expenditure for the first quarter of the 2024/25 financial year.
This failure by consumers to pay for services rendered, particularly for the supply of electricity, is the main contributor to the financial malaise faced at many municipalities, and results in their not paying their creditors. Municipal debt to Eskom and the seven water boards reduces their financial sustainability.
The Treasury said in a media statement that R1.3bn (0.3%) of money owed to municipalities was written off as bad debt.
An increase in outstanding creditors could be an indication that municipalities are experiencing liquidity and cash challenges and consequently are delaying the settlement of outstanding debt owed.
— National Treasury
Households owed 71.8% or R277.6bn of the total debt compared with R220.4bn (71.9%) in the first quarter of the previous financial year.
Government debt to municipalities accounted for R23.2bn (6%) of the total outstanding debt, up from the R18.6bn reported in the first quarter of 2023/24).
Municipalities owed creditors R126.8bn by the end of September, an increase of R25.4bn on the R101.4bn reported in 2023/24.
Provinces with the highest percentage of outstanding municipal creditors in the category greater than 90 days include the Free State at 91.5%, the Northern Cape at 90%, Mpumalanga at 88.6% and the North West at 82%.
“An increase in outstanding creditors could be an indication municipalities are experiencing liquidity and cash challenges and consequently are delaying the settlement of outstanding debt owed,” said the Treasury.
At the end of September aggregate spending by municipalities was 21.6% or R140.4bn of the total adopted expenditure budget of R649.9bn. Aggregated billing and other revenue came to 26.4% or R172.3bn of the total adopted revenue budget of R652.3bn. Capital expenditure amounted to R9.2bn or 11.9% of the adopted capital budget of R77.4bn.
“Analysis of the collection rates indicate that while municipalities have budgeted for an 88.8% collection rate, aggregated actual collection performance against billed is 73.1%. The metros budgeted for a 92.4% collection rate and collected 71.3%.
“The secondary cities seem to be performing better than the national and metro average. The budgeted billing was 87.2% and the collection was 83.6%.”
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