Sandton City was among the businesses targeted by the City of Joburg for failure to pay for services. Photo by Dean Hutton_ Bloomberg_Getty Images

By Staff Reporters

Defaulting big businesses, especially shopping centres and large property owners, are the main cause of poor debt collection in Gauteng municipalities, an expert has claimed.

The billing expert, who is close to the City of Joburg’s Revenue Department, has alleged
that well-established companies, property owners who lease out large properties in particular, are not paying for municipal service.

They would rather put away those funds in interest-bearing facilities and only pay when threatened with a switch off.
This, he said, was made worse by government incompetence and erroneous billing.

“Because most municipalities’ billing systems, as is the case with City of Joburg owing to migration and amalgamation, are erratic and query-prone. As a result, most major companies withhold payment, and put the money in interest-bearing facilities, only to pay either once all disputes are resolved or when forced to do so.

“The other problem is incompetence and competing – in government. Some government departments such as health, would choose to shift funds to other pressing matters instead of paying for municipal services.

“If councils had effective collection systems, the bills shouldn’t run into such large debts exceeding 90 days.
“They should be able to implement proper debt collection much earlier,” he said.

National Treasury agrees it is worried about escalating municipal consumer debt.

“Aggregate municipal consumer debts amounted to R230,7 billion compared to R230,5 billion reported in the second quarter of 2020/21. A total amount of R73,7 billion has been written off as bad debt.

“Government accounts for 6,7% or R15,5bn (R20,7bn reported in the 2020/21 second quarter) of the total outstanding debtors.
“Of concern is outstanding creditors in excess of 30 days relating to bulk electricity and water, trade creditors and loan repayments,” Treasury said.

It stressed that not all the outstanding debt of R230,7bn is realistically collectable, as these amounts are inclusive of debt older than 90 days, interest on arrears and other recoveries. If consumer debt is limited to below 90 days, then the actual realistically collectable amount is estimated at R36,5bn, it said.

Metropolitan municipalities are owed R115,4bn, up from R111,2bn in the second quarter of 20/21.

Households in metropolitan areas are reported to account for R84,2bn or 73% of outstanding debt, followed by businesses which account for R25,6bn or 22,2% and debt owed by organs of state at R5,0bn or 4,4% of the total outstanding debt owed to metros.

For secondary cities, R468,4bn is reported as outstanding consumer debt. The majority of the debt is owed by households amounting to R35,9bn.

An amount of R41,7 billion or 89% has been outstanding for more than 90 days.

Municipalities owed their creditors R65,5bn as of 31 March 2021, a decrease of R1,7bn when compared to the R67,3bn reported in the second quarter of 2020/21.

It noted that municipalities in the Free State have the most outstanding creditors greater than 90 days at R15,4bn, followed by Mpumalanga at R12,3bn and Gauteng at R6,6bn.

The total balance on borrowing for all municipalities equates to R68,3bn as of 31 March 2021.

Out of Gauteng’s 11 municipalities, and three metros, the City of Tshwane has been leading the offensive on defaulters with a heightened debts collection drive.

Mayor Randall Williams has said the aggressive switch-off campaign was aimed at collecting R17bn owed to the city by businesses and homeowners.

“We’ve been attacking different categories. We started with businesses and government, and now we’ll concentrate on upmarket residentials. Eventually, we’ll go to residential households,” he told City Press.

The city is owed R8bn by residential customers, while businesses and government departments owe R5bn and R1,3bn respectively.

Last year, Lebogang Maile, the MEC for Gauteng Co-Operative Governance and Traditional Affairs (Cogta), said municipalities in the province were owed R58,3bn, with more than 85% household customers not paying for services.

The Tshwane strategy of targeting big business and government for switch stands a better chance of success in that it can terminate water supply to non-residential properties easier than it would in households.

A Constitutional Court ruling makes it illegal to terminate water for households but it is lawful for a municipality to terminate the supply of water to a commercial property entirely for non-payment of outstanding municipal debt. They only have to abide by the relevant laws relating to giving of notification of the disconnection.

The passing of the buck, where government is concerned, may remain a challenge. Last year, the Gauteng government conceded it owed its municipalities millions for property rates and other municipal services such as electricity and water.

It blamed its non-payment on the alleged failure by landlords to confirm property ownership, monthly invoices and statements not being sent to the relevant departments on time, or being sent to the incorrect department, among others.

Unpaid debt was revealed by Gauteng finance and e-government MEC Nomantu Nkomo-Ralehoko in her response to parliamentary questions posed by DA MPL Adriana Randall at the legislature.

“The departments were in arrears with municipalities because of several factors, ranging from monthly invoices and statements not sent to the relevant departments on time, or sent to the incorrect department, and municipalities failing to resolve disputes.

“Payment delays could also be attributed to payments made but not yet allocated by municipalities or payments allocated to the incorrect department accounts by municipalities,” said Gauteng Treasury.

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