At the end of June this year, the end of the 2011/2012 financial year, metro municipalities in South Africa were owed R46.1 billion. The amount for all municipalities in the country is R77.5 billion. Households remain the biggest culprit, accounting for 65.4% or R50.8 billion.

The three metros where the outstanding debt has increased substantially in the last year are Mangaung, where debt has increased by 37.6%, the City of Tshwane with 34.5% and the City of Johannesburg with 26%.

According to the Fourth Quarter Local Government Section 71 Report, released on Friday by National Treasury, the total amount owed to metro municipalities is 19.3% higher than last year.

In total all municipalities owed their creditors R15.9 billion as at 30 June 2012, an increase of R4.8 billion or 43% quarter-on-quarter.

One of the issues seems to be the underperformance of actual collections against billed revenue. The report shows that the average collection rate for the four quarters of the 2011/12 financial year is only 90.7%.

According to National Treasury, this underperformance of collections against billed revenue could be attributed to, amongst others, the affordability of municipal services.

“The ongoing economic slowdown and substantial increases in electricity tariffs are starting to impact on affordability and subsequently the ability of consumers to pay for services,” Treasury said in a statement accompanying the report that covers 276 municipalities in the country.

A worrying factor is the age of the municipalities’ debtors’ books. Looking at the eight metro municipalities, 74.4% of the debt is older than 90 days where it gets very difficult to collect. Only 18.4% is between 0 and 30 days.

The largest amounts show that the City of Johannesburg is owed R15.2 billion, Ekurhuleni R10 billion, City of Tshwane R5.1 billion, Cape Town R6.1 billion and eThekwini R5.2 billion.

Of the more than R15 billion owed to the City of Johannesburg, R10.6 billion is older than 90 days. For Tshwane that is R3.4 billion and for Ekurhuleni it’s R8.4 billion.

Source: moneyweb