Debtors drive Gauteng Municipalities to R11.5 billion in loans

Fred Nel MPL

Spokesperson on Local Government

Gauteng municipalities’ exposure to loans and credit amounts to R11.5 billion, according to Local Government MEC Ntombi Mekgwe’s response to my written question.

Of concern is the fact that the major municipalities in Gauteng were downgraded by Moody’s recently which makes their ability to obtain credit more difficult and the credit they obtain more expensive. Ultimately, residents have to foot the bill for loan repayments.

However, the total debt owed to Gauteng municipalities currently amounts to R35.4 billion. If municipalities showed the political will to collect on these debts they would be able to fund capital and operating shortfalls will ease without entering into expensive loan agreements.

This points to the lack of capacity within Gauteng municipalities to manage their finances properly and is one of the causes that leads to exorbitant annual increases in municipal rates and taxes; usually way above the inflation rate. Gauteng residents cannot afford higher rates and taxes.

The tax bases for municipalities are shrinking in real terms while the service delivery demands increase. Linked to the fact that credit will become more unaffordable due to ratings agencies downgrades this forecasts financial disaster for municipalities in the medium term.

There is an inherent risk for government that it would have to bail out municipalities if drastic steps aren’t taken to improve their financial management capacity.

I therefore call on the MEC for local government and housing to urgently formulate a plan to assist municipalities in improving their financial management capacity. The issue of debt collection must enjoy special preference in such a plan.

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