Municipalities write off R574m as bad debt

Cape Town - Generally speaking, spending by municipalities has increased from the first quarter of this year, but is still poor performance compared to the second quarter of the previous year, National Treasury said on Friday.

Its latest report on local government revenue and expenditure covers the second quarter of the 2015/2016 financial year.

Metropolitan municipalities are owed R64.4bn (R63.1bn reported in the first quarter) in outstanding debt as at December 31 2015. This represents an increase of R9bn (16.3%), from the second quarter of the 2014/2015 financial year.

The City of Johannesburg is still owed the largest amount at R21.6bn (R21.1bn in the first quarter). This is followed by Ekurhuleni Metro at R13.6bn (R13.4bn in the first quarter), City of Tshwane at R7.5bn (R7.2bn in the first quarter) and Cape Town at R6.9bn (R6.5bn in the first quarter).

Households in metropolitan areas are reported to account for R42.1bn or 65.3% of outstanding debt to metros, followed by businesses which account for R18.4bn or 28.4%. Debt owed by government agencies is approximately R1.6bn (2.5%) of the total outstanding debt owed to metros.

Municipalities owed their creditors R27.4bn as at December 31 2015, an overall increase of R1bn on the R26.4bn reported in the first quarter of 2015/2016.

The Free State has the highest percentage of outstanding creditors greater than 90 days at 80.5%, followed by North West at 74.4% and Mpumalanga at 70.3% respectively. The year-on-year increase in outstanding creditors could be an indication that municipalities are experiencing liquidity and cash challenges, said Treasury.

Aggregate municipal consumer debts amounted to R117.9bn (compared to R115.8bn reported in the first quarter) as at December 31 2015. A total amount of R574m has been written off as bad debt.

On aggregate, municipalities spent 42.7%, or R159.4bn, of the total adopted budget of R373.5bn by the end of 2015. In respect of revenue, aggregate billing and other revenue amounted to 48.6% or R180.3bn of the total adopted revenue budget of R371.1bn.

Of the adopted operating expenditure budget amounting to R306.6bn, 44.9% was spent by the end of 2015.

Municipalities have adopted the budget for salaries and wages expenditure at R84.9bn for the 2015/2016 municipal financial year. This represents 27.7% of their total operational expenditure budget of R306.6bn. At December 31 2015 spending was R41bn or 48.3%.

Treasury pointed out that waste management continues to perform lower for both metros and secondary cities when compared to other core services.