Municipalities still saddled with bad debts

NOVEMBER 13, 2015

While South Africa’s nine largest municipalities have shown an improvement in the management of their finances, some municipalities such as Johannesburg are still saddled with bad debt, mainly because of unfavourable economic conditions.

A report on the finances of the country’s largest municipalities, released by the South African Cities Network on Wednesday, showed that Johannesburg, Cape Town, eThekwini, Ekurhuleni, Tshwane, Nelson Mandela Bay, Buffalo City, Mangaung and Msunduzi have experienced an increase in debtor levels.

On average, gross debtors of the nine municipalities surged by 14% annually since 2008/2009.

The report said an increase in the number of institutions and individuals who owe the municipalities could be an indication of poor debt management, or the inability of households and businesses to pay their debt due to poverty and unemployment as well as difficult business conditions.

Johannesburg and Msunduzi’s debt levels were almost 2.5 times higher in 2013/2014 than in 2009/2010. Johannesburg attributed the rise in bad debt to the poor economic climate.

The report said municipalities have had to contend with the consequences of the 2008 economic meltdown which has resulted in reduced economic growth, high inflation and rising unemployment.

The economic slowdown and higher unemployment have directly affected households' abilities to pay municipal bills, the report said.

---News24wire