Defaulting ratepayers leaving local municipalities in dire straits

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South Africa’s metros are the worst affected‚ with unaffordability cited as another factor for increasing non-payment.

South Africans currently owe municipalities R128-billion‚ R19.7-billion more compared to the previous financial year.

Collectively the country’s eight metros are owed R65.7-billion.

The City of Johannesburg‚ whose residents owe R18.5-billion‚ has the highest number of defaulters compared to other metros. Next is Ekurhuleni municipality‚ which is owed R13-billion‚ followed by the City of Tshwane (R8.6-billion) and then the City of Cape Town (R8.6 billion).

Rendani Tshivhase‚ the City of Johannesburg’s strategic advisor to MMC for finance Rabelani Dagada‚ said the billing system crisis was a self-inflicted wound.

“It was a mistake for the city to allow customers to be indebted. When customers dispute an amount on their bill‚ and if it is not resolved quickly‚ the debt grows when the customer does not pay.

“The main reasons residents do not pay is that they question their bills’ accuracy.”

Municipal IQ managing director Kevin Allan said: “Non-payment by households is a big problem”.

“There are two key issues‚ one being capacity within municipalities to ensure debt collection is managed properly‚ with people needing to be billed accurately and bills given to the correct person. The second part is the collection of money which may not be collected efficiently.”

Allan said that communities were increasingly refusing to pay for services that they have used‚ partly because they could not afford the services.

South African Local Government Association’s executive director for municipal finance‚ Simphiwe Dzengwa‚ said it was not just the billing system that created problems in rate collections‚ but also the value people attached to the services they received.

“If people don’t see value in what is provided (services) some may be reluctant to pay.”

Tshivase said the lack of payment by households‚ which could be linked to the economic crisis‚ affected service delivery.

“Our country is in a recession. In 2016‚ economists estimated that the impact of a loss of investment grade rating would give rise to 0.6% on interest rates with the rand falling by 6%‚ which will have a knock-on effect on the GDP by end of the year.”

The City of Johannesburg’s media specialist‚ Luyanda Mfeka‚ said the billing crisis was caused by the integration of 16 municipal councils into one single metropolitan municipality.

The Ekurhuleni Metropolitan Municipality said while more households were defaulting‚ it had not impacted on the metro’s ability to deliver services.

Municipality spokesperson Themba Gadebe said: “All major projects within the approved budget are continuing.”

“Where unaffordability is raised as a reason (or not paying services accounts)‚ we immediately offer pay-off arrangements and where pensioners and no income earners are concerned‚ the services of the ‘Indigent Management Programme’ are availed.”

Gadebe said where residents simply would not pay‚ “Our credit control actions include disconnection of services‚ blocking of pre-paid sales and [handing] over of debt to debt collectors. [Our] credit control actions are applied to all customers and customer groupings‚ including government.”

The City of Cape Town said the number of debtors in the city remained fairly constant and there were no unexpected spikes as the city has “prioritised” debtors by developing systems for different categories for defaulters.

Finance mayoral committee member Johan van der Merwe said the city had a collection ratio of 95.2%.

“Debt management is being intensified especially against those who can pay‚ but choose not to‚ and frequent defaulters.”

KwaZulu-Natal’s Ethekwini metro spokesman‚ Tozi Mthethwa‚ said given the tough economic times‚ they were progressing well in terms of revenue collection.

“To date‚ we have achieved a collection rate of 96%. There has been no material impact on service delivery. Overall the city’s finances are stable.”

The City of Tshwane failed to respond to questions.

Treasury has indicated that municipalities may need to write off a large portion of the debt because it is older than 90 days‚ with debt less than 90 days equating to R24.1-billion.

 

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