South African municipalities are heavily in debt – and it’s largely due to unpaid bills coming from households in the country’s biggest metropolitan areas.
This is according to the latest local government revenue and expenditure report for the second financial quarter, released by SA Treasury this week.
Treasury reports that aggregate municipal consumer debt has increased to R117.9 billion in the second quarter of the financial year (to December 2015) – up from R115.9 billion recorded in the previous quarter.
The largest component of debt owed is attributable to households, who owe R77.8 billion (or 66%) of the total.
Alarmingly, Treasury noted that only a fraction of the debt is “realistically recoverable” as it includes debt older than 90 days – historic debt accumulated over a long period.
Only R22.7 billion of the total debt is realistically recoverable, Treasury said, while noting that R574 million was written off as bad debt over the period.
Who owes the most
Metropolitan municipalities are owed the most, accounting for R64.4 billion of total outstanding debt – an increase of R9 billion year-on-year, the report said.
Of this number, households owe R42.1 billion (65%); businesses owe R18.4 billion, and government owes R1.6 billion.
These are the biggest offending metros by the amount owed:
- City of Johannesburg – R21.6 billion
- Ekurhuleni – R13.6 billion
- City of Tshwane – R7.5 billion
- City of Cape Town – R6.9 billion
Not paying on time
Treasury also reported that South African municipalities owe R27.4 billion to creditors – R1 billion more than the previous quarter.
The Free State has the highest percentage of outstanding creditors greater than 90 days at 80.5%, followed by the North West Province at 74.4% and Mpumalanga at 70.3%.
“This year-on-year increase in outstanding creditors could be an indication that municipalities are experiencing liquidity and cash challenges,” Treasury said.
On aggregate, municipalities have spent only 42.7%, or R159.4 billion, of the total adopted budget of R373.5 billion as at 31 December 2015.
In respect of revenue, aggregate billing and other revenue amounted to 48.6% or R180.3 billion of the total adopted revenue budget of R371.1 billion.
Capital expenditure amounted to R21.6 billion or 32.4% of the adopted capital budget of R66.9 billion.
“Generally, spending has increased from the first quarter of this year, but it is still a poor performance compared to the second quarter of the previous year,” Treasury said.