Business

Govt entities now owe municipalities more than R20 billion – and growing fast

Business Insider SA
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  • State entities owed municipalities R21 billion at the end of 2020, new data from Treasury shows.
  • Households are by far the biggest debtors for local governments – but state debt has been growing fast.
  • Municipalities have complained that they can't pay the likes of Eskom if they are not paid first.
  • And they face increasing pressure to pay the likes of Eskom.
  • For more stories go to www.BusinessInsider.co.za.

Municipalities are facing big pressure from government to pay Eskom what they owe, as that utility looks for R1 billion a week to keep the lights on.

But municipalities aren't being paid by their own debtors, a report from the National Treasury this week shows – and state entities are growing culprits.

The local government revenue and expenditure report, referred to as the Section 71 report, captures aggregate municipal revenue and expenditure up to the end of December 2020, the mid-point of the financial year for municipalities. 

Non-paying residents are by far the biggest problem for municipalities, those numbers show. At the end of December, households owed their local governments R167 billion, making up well over 70% of all debt.

But the amount owed to municipalities by organs of state has been growing fast. In total, entities controlled by the government owed municipalities nearly R21 billion by the end of the half-year, an increase of 57% compare to the previous year.

Municipalities have previously complained that they can not pay their bills – to the likes of Eskom – if they are not themselves paid.

At the end of December, all municipalities combined owed their creditors R67 billion. That is up 40% compared to the year before, but still represents well under a third of the money those municipalities are owed in rates and taxes, and for the electricity and water they resell.

Much of the money owed to municipalities is historic and, realistically, probably not collectable, the Treasury says (though it has not endorsed writing anything off). That leaves a "realistically collectable" amount estimated at R38 billion, leaving the municipalities well in the red.

While municipalities have trouble collecting money from their residents, businesses, and government entities, their major creditors are working hard to find ways to make them pay up. 

In November, a high-level government task team on Eskom called for decisive action against those who do not pay for municipal services, in part because that threatens Eskom's stability when municipalities can not pay it. Municipalities also face the threat of having water cut off, conditional grants withheld, and being placed under administration, among the big-stick approaches to making them pay what they owe.

Meanwhile, municipalities have written off more than R8 billion owed to them by state-controlled entities, which is nearly a fifth of all the bad debts on their books. 

(Compiled by Phillip de Wet)

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