Do local municipalities need to enforce more aggressive credit control measures to recover the billions of Rands owed to them?
During a briefing on Thursday, November 7, the South African Local Government Association (Salga) reported that the rolling debt, since pre-1994, sits at R165.5 billion as at June 30, which is up from R143.2 in 2018.
Out of this staggering figure, Xolile George, Salga’s chief executive claims that only R40 billion of the debt is recoverable.
But why is there is so much debt? What has led to the debt constantly increasing?
During Salga’s national executive committee meeting, discussions revolved around the issue pertaining to the debt.
Currently, households owe the largest portion of the monies. In fact, households’ amount to 72% of the total debt. Services rendered to government institutions make up approximately 6.2% of the debt. While businesses and metros owe the remainder of the debt.
Salga president, Thembi Nkadimeng describes the debt as one of the contributing factors to why municipalities are unable to make the necessary payments to Eskom and water providers.
In fact, Nkadimeng claims that municipal debt to Eskom and water boards is currently sitting at R25 billion and R14.9 billion respectively.
It was also noted the government owed municipalities R10.3 billion for water and electricity, while businesses owed municipalities approximately R23 billion.
With the debt seeming to grow steadily, Nkadimeng emphasises that if municipalities receive the monies owing to them, they will, in turn, be able to pay their respective service providers.
Salga is now taking drastic steps to encourage municipalities to enforce credit control management measures.
These measures include targeting government properties and businesses, cutting off their services where there is merit.
Furthermore, Salga wants municipalities to perform a rigorous analysis of the gross debt, as well as to restructure debt. This is to see which of the outstanding monies can be recovered and which debts can be written off.
However, will local municipalities heed Salga’s requests, enforcing more aggressive and urgent credit control measures?