GAUTENG MUNICIPALITIES FACE THE FINANCIAL ABYSS

Fred Nel MPL

DA Gauteng Spokesperson for Local Government

Gauteng municipalities are moving towards the financial abyss, according to the growth in their debtors. Debt owed to municipalities in Gauteng rose by R4.26 billion (19.2%) in the last financial year, between 31 March 2011 and 31 March 2012 (see table below). This is debt older than 90 days.

The growth in debtors owing for more than 90 days is a serious problem, as the bulk of these debts are usually not recovered.

R26 billion can make a huge difference in the cash flow and liquidity of Gauteng municipalities and improve their ability to deliver services. This amount alone could build 378 000 houses across the province. The impact of debtors in arrears on service delivery is therefore very clear.

More municipalities in Gauteng are obtaining short term loans worth hundreds of millions of Rand to cover their cash flow shortages.

These shocking figures also highlight the lack of financial management capacity within Gauteng municipalities. The inability to collect on the debt owed to them points to the failure of credit control policies being implemented by municipalities. It also implicates the Gauteng Department of Local Government and Housing for its failure to assist municipalities successfully in turning around their internal financial management.

The DA proposes three steps to end this vicious cycle:

· The South African Revenue Service (SARS) must be brought in to explore the possibility of linking municipal arrears with income tax returns where this is possible. An agency agreement between municipalities and SARS will cost much less than the expensive debt collection methods utilised currently.

· Municipalities must be encouraged to appoint well-qualified personnel to their financial departments to strengthen their management capacity. More personnel should also be employed in call centres to contact consumers who are in arrears to improve collection rates.

· Pre-paid electricity meters should become mandatory in all new building developments and solar panels should become standard features on all RDP houses. Municipalities must also introduce subsidy schemes for all existing buildings wishing to install pre-paid electricity meters and solar panels. A partnership with Eskom in this regard should assist municipalities in the roll-out of alternative energy measures.

I will also request that the DA representatives in municipalities across the province take up these proposals in the Councils.

This trend cannot be allowed to continue as it will inevitably lead to bankruptcy of municipalities in Gauteng. Service delivery levels will continue to decrease and more violent community protests can be expected.

The following is an analysis of the growth in municipal debtors older than 90 days for the 12 months between 31 March 2011 and 31 March 2012. The information was sourced from the Gauteng Provincial Gazettes published on 27 June 2011 and 28 May 2012.

MUNICIPALITY

31 MARCH 2012

31 MARCH 2011

INCREASE/ DECREASE

Total debt over 90 days:

R26 478 284 000

R 22 212 002 000

R4 266 282 000

Jhb:

R11 213 804 000

R8 389 000 000

R2 824 804 000

Tshwane:

R3 587 271 000

R3 219 316 000*

R367 955 000

Ekurhuleni:

R8 125 004 000

R7 198 000 000

R927 004 000

Emfuleni:

R2 289 455 000

R1 869 000 000

R420 455 000

Lesedi:

R162 704 000

R129 594 000

R33 110 000

Midvaal:

R77 498 000

R54 661 000

R22 837 000

Sedibeng District:

R652 000

R1 768 000

-R1 116 000

Westonaria:

R109 466 000

R94 077 000

R15 389 000

Randfontein:

R219 957 000

R209 799 000

R10 158 000

Mogale:

R611 644 000

R558 635 000

R53 009 000

Merafong:

No information available

R490 813 000

N/A

West Rand District:

R8 218 000

R 3 980 000

R4 238 000

*Includes the following amounts for 2011: Tshwane (R2.759 billion), Kungwini (R336,440m), Nokeng tsa Taemane (R123,876m) which have been merged since March 2011.

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