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Cape Town - New Cooperative Governance and Traditional Affairs (CoGTA) Minister David van Rooyen must find a solution to the mounting levels of unpaid municipal debt if municipalities are to survive a declining economy, according to Oupa Mbokodo, Grant Thornton’s director of advisory services.
Revenue management, and particularly revenue assurance, should be high up on the list of priorities for Van Rooyen to address as far as municipalities are concerned, in Mbokodo's view.
He added that in his mid-year State of the Nation update President Jacob Zuma said debt owed to municipalities was close to R100bn, which was almost double the amount owed in 2009. In addition, municipalities themselves owed Eskom more than R10bn in outstanding payments and water boards more than R2bn.
“Effective revenue assurance could rescue many failing municipalities and underpin improved financial management, especially at a time where more challenges are forecast for the South African economy, already caught in the grip of stagnant economic growth,” said Mbokodo.
“As the economy continues to decline, municipalities will face even bigger challenges in generating revenue. The continued restructuring and closure of businesses, which lead to job losses, would have far reaching effects for local government."
Revenue generated from rates, taxes, and service charges will also dwindle and the ratio of indigents compared to paying customers is likely to increase, cautioned Mbokodo.
“The equitable share and grants from national or provincial government is expected to be under pressure going forward. So, while communities deserve and continue to demand quality and timely services, some communities cannot afford to pay for the services rendered," he said.
"It is, therefore, imperative the municipalities develop a comprehensive revenue assurance system. Financial sustainability can be achieved through appropriate funding, financial viability, revenue generation capability, and revenue management processes.”
Mbokodo said Van Rooyen should continue the task started by Minister Pravin Gordhan of turning around "bloated, inefficient entities that largely find it difficult to account" into organisations that are able to deliver services to their communities and account for their budgets.
