South Africa has another big problem – people aren’t paying for municipal services
National Treasury has published its local government revenue and expenditure report for the fourth quarter of the 2019/20 financial year, showing that municipal consumer debt continues to climb.
The report covers the performance against the adjusted budgets of local government for the fourth quarter of the municipal financial year ending on June 2020, and includes spending against conditional grant allocations for the same period.
In aggregate, municipalities spent 79.9% or R384.3 billion of the total adjusted expenditure budget of R481.2 billion as at 30 June 2020. In respect of revenue, aggregate billing and other revenue amounted to 88.8% or R427.5 billion of the total adjusted revenue budget of R481.4 billion, Treasury said.
Of the adjusted operating expenditure budget amounting to R412.4 billion, R343 billion or 83.2% was spent by the end of June 2020.
The report shows that municipalities have adjusted downwards the budget for salaries and wages expenditure to R123.5 billion. This constitutes 30% of their total adjusted operational expenditure budget of R412.4 billion.
At 30 June 2020, spending is 88.5%, or R109.4 billion.
In the period under review, capital expenditure amounted to R41.2 billion, or 59.9%, of the adjusted capital budget of R68.8 billion.
When billed revenue is measured against their adjusted budgets, the performance of metros reflects a shortfall across water services for the fourth quarter of the 2019/20 financial year.
This does not take into account the collection rate:
- Water revenue billed was R23.3 billion against expenditure of R27.1 billion;
- Energy sources revenue billed was R76.2 billion against expenditure of R69.8 billion;
- The revenue billed for waste water management was R7.1 billion against expenditure of R6.8 billion, and
- Levies for waste management billed were R9.8 billion against expenditure R8.2 billion.
Consumer debt
Aggregate municipal consumer debts amounted to R191.5 billion as at 30 June 2020, up from R181.3 billion reported in the third quarter of 2019/20.
In South Africa, municipal consumer debt refers to the non-payment of property rates, fees/charges for services provided by municipalities (for example water, sanitation, electricity and refuse removal) and various other financial obligations to munici-palities (which include for example, traffic fines and rental housing payments).
Municipal consumer debt encompasses late payments for property rates, service and other municipal charges, as well as amounts that are deemed irrecoverable.
The report noted that government agencies account for 7.7% or R14.8 billion (R18.1 billion reported in the 2019/20 third quarter) of the total outstanding debtors.
The largest component of this debt, however, relates to households and represents 69.9% or R133.9 billion, up from 70.5% or R127.7 billion in the third quarter.
It needs to be acknowledged that not all the outstanding debt of R191.5 billion is realistically collectable, as these amounts are inclusive of debt older than 90 days, interest on arrears and other recoveries, the Treasury said.
This should not be interpreted that the National Treasury by implication suggests that the balance must be written-off by municipalities, the government’s budget management arm said.
If consumer debt is limited to below 90 days, then the actual realistically collectable amount is estimated at R33.4 billion, it said. This is only 17.4% of the outstanding debt.
Worst offenders
According to the report, metropolitan municipalities are owed R102.3 billion in outstanding debt as at the end of June 2020, up from R88.1 billion reported in the third quarter of 2019/20.
The largest contributors are the City of Johannesburg which is owed the largest amount at R31.1 billion, followed by City of Ekurhuleni at R16.4 billion, City of Tshwane at R16.2 billion and eThekwini at R13.5 billion.
Households in metropolitan areas are reported to account for R71.1 billion or 69.5% of outstanding debt, followed by businesses which account for R24 billion or 23.5%, Treasury said.
Debt owed by government agencies is approximately R4.5 billion or 4.4% of the total outstanding debt owed to metros, it said.
For the secondary cities, R35.8 billion in outstanding consumer debt, down from R39.9 billion reported in the third quarter of 2019/20.
The majority of debt is owed by households amounting to R27.5 billion or 76.8% of the total outstanding debt. An amount of R31.5 billion or 88.2% has been outstanding for more than 90 days.
Municipalities owed their creditors R60 billion, an increase of R10.7 billion when compared to the R49.3 billion reported in the third quarter of 2019/20.
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