Gauteng municipal debtors top R36 billion

Fred Nel MPL

Spokesperson on Local Government

Gauteng municipalities were owed R36.2 billion by the end of March 2013, an increase of 2.5% from end-December 2012. This according to the latest consolidated Gauteng municipal statements for January – March this year as published in Provincial Gazette No. 130.

A large percentage of these debtors are less than 60 days outstanding on their accounts and should generally not be of concern. However, the disconcerting figure is the amount owed by debtors who are more than 60 days outstanding, amounting to R28.9 billion, an increase of 3.4%.

The growth in the age of debtors is of particular concern as this is an indication of Gauteng municipalities’ deteriorating financial management capabilities that should enable them to collect monies owed to them.

From experience it is unlikely that municipalities will be able to collect debt older than 60 days. This is also the category where debt increased with the highest percentage (63.9%) while debt older than 90 days grew by 4.7% compared to December 2012.

The largest groups of debtors remain households (66.2%), businesses (26.8%) and “other” (5.1%), while government debt constitutes 1.9% of overall municipal debt older than 60 days in Gauteng.

Although the overall growth in debt owed to municipalities is only 2.5% quarter on quarter, the large percentage movements from debtors younger than 61 days to older categories is of great concern especially since only 40% of debt older than 30 days owed to municipalities is collected.

What should be an asset of R28 billion for municipalities in Gauteng to be spent on service delivery is, for all purposes, lost.

Gauteng requires a serious interrogation of the state of municipal finances in the province. Municipalities, the provincial government, the Gauteng Legislature Portfolio Committee on Local Government and local government stakeholders should partner as soon as possible to seek solutions for financial management deficiencies in municipalities.

The impact of a reduction in service delivery and financial management in municipalities cannot be underestimated. It is through service delivery that infrastructure is constructed and maintained that investors require.

Well-functioning municipalities attract investment required for sustained economic growth in Gauteng and therefore it is crucial that they are all properly managed. If not, investors will look elsewhere.

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