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Treasury paints bleak picture of debt repayment amongst councils

17 August 2017 - 10:44 By Khulekani Magubane
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National Treasury has painted a bleak picture of municipal finances and their long-term sustainability in its preliminary report on local government revenue and expenditure for the period beginning on 1 July 2016 and ending on 30 June 2017.

The report comes out at a time when Eskom has resorted to scheduled cut-offs of power to the biggest defaulters in the country until they make a good faith commitment to repay their debts to the struggling power utility.

However‚ municipalities are not the only transgressors in the debt climacteric. Municipalities of the country are owed over R120bn by households‚ businesses and government offices. Treasury stroked doubts that this debt could reasonably be recovered by councils.

"It needs to be acknowledged that not all the outstanding debt of R128.4bn is realistically collectable as these amounts are inclusive of debt older than 90 days (historic debt that has accumulated over an extended period)‚ interest on arrears and other recoveries. If consumer debt is limited to below 90 days‚ then the actual realistically collectable amount is estimated at R24.9bn‚" the report said.

However‚ municipalities do themselves no favours in their bid to try and recover the funds‚ as they are spending less than 90% of their allocated budgets. This is despite the fact that councils experience immense difficulty in providing services to residents and businesses.

"As at 30 June 2017‚ municipalities on aggregate spent 87.%‚ or R348.6bn‚ of the total adjusted budget of R400bn. In respect of revenue‚ aggregated billing and other revenue amounts to 91.2%‚ or R359.4bn‚ of the total adjusted revenue budget of R394.1bn‚" the report said.

In a silver lining‚ Treasury noted more efficient collection of revenue against expenditure.

"Water revenue billed was R6bn against expenditure of R5.1bn; electricity revenue billed was R17.9bn against expenditure of R15.1bn; the revenue billed for waste water management was R2.7bn against expenditure of R1.9bn; and levies for waste management billed were R1.9bn against expenditure of R1.5bn‚" the report said.