Pretoria - Consumers' indebtedness to municipalities amounts to more than 2% of the gross domestic product (GDP) and needs urgent attention.

This is an observation by Mike Schüssler, chief economist at Economists.co.za, in reaction to National Treasury's announcement that consumers owed local authorities in excess of R56bn on December 31 last year.

More than R42bn or 76% of this debt has been outstanding for longer than 90 days.

Consumers' indebtedness to municipalities increased by 5.3% or R1.6bn in 2009, but Schüssler says the relatively small increase can be attributed to municipalities having written off bad debts.

By doing so they are repeatedly rewarding defaulters, he reckons, placing an ever-increasing burden on the small group of honest, paying consumers.

If guidelines are not urgently produced to limit write-offs and clamp down on defaulters, he says, the group that is paying will become disgruntled and gradually reduce in number.

This will lead to a downward spiral for municipalities and all those waiting for service delivery.

Most (27%) of the arrears are for water, with property rates (26.5%) in second place.

Only 14% of the outstanding indebtedness is for electricity.

Schüssler says this is because electricity can be disconnected. The consequences of non-payment of water and property rates are however not obvious.

The Treasury said that it had expected municipalities increasingly to struggle to collect their rates and services fees. But thus far they are handling their income fairly well.

Cape Town's outstanding consumer indebtedness to the council increased by almost 25% in 2009.

Its R966m increase is however less than the R1.1bn added by Ekurhuleni.

Johannesburg is the only metropolitan council that reduced consumer indebtedness by R1.7bn. But the total is still a whopping R9bn.

About 55% of the money owed to metropolitan councils is by households, 13% by businesses and 5% by government institutions.

- Sake24.com

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