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Mchunu was addressing the provincial assemble of the South African Local Government Association which is underway in Durban today.
“Cash is the lifeblood of an organisation and is a vital element in the success and continuity of a municipality. Therefore, the municipality’s cash flow is one of the most indicators of financial health. Revenue and debt collection is one critical element which ensures a healthy financial status of a municipality,” said Mchunu.
“I want to state that I am concerned by the fact that the total debt owed to KZN municipalities at the end of the fourth quarter of the 2012/13 financial year was R11.2bn. This has increased by 13.1% from R9.9bn owed at the end of the fourth quarter in 2011/12 financial year.”
EThekwini had the highest largest amount outstanding debt (R5.5bn), followed by uMgungundlovu (R2bn) of which R1.5bn relates to debt owing to Msunduzi Municipality. Sisonke recorded the lowest amount outstanding debt of R159.3m.”
“Provincial Treasury records show that R3.5bn (31.4%) of all debt was from water, followed by property rates at R3.5bn (31.2%). As of 30 June 2013, a significant portion of the outstanding debtors are owed by households’ customer groups amounting to R6.4bn. This is followed by debtors classified as business at R2.5bn and government R697.9m,” said Mchunu.
“Government debt has decreased by 27.2% from R887.5m in 2011/12 to R697m in 2012/13. UMgungundlovu and uThukela Districts had significant amounts of debt owed to them by government totalling R320.2 million. The municipalities in the uThungulu District had the majority of their debt - R176.1m owed to them by business.”
Mchunu appealed to the people of KZN - individuals and big business - to develop the culture of paying for services rendered by municipalities.
For the year under review, KwaZulu-Natal municipalities paid R1.9bn for bulk water, which is an increase of R1.2m when compared to June 2012. For electricity, KZN municipalities purchased electricity totalling R2.7bn.
“It is worrying that there are provincial and national government departments that also owe municipalities millions of rands. I want to assure mayors and councils of various municipalities that I will be taking up this matter with Cabinet and national government to ensure that it is speedily resolved,” said Mchunu.
“While it is easy to address debt owed to municipalities by government departments in terms of the provisions of the Municipal Finance Management Act, it is difficult to deal with debt owed by private consumers.”
Mchunu also appealed to the KZN Chamber of Commerce, the KZN Growth Coalition and other business structures to work with municipalities to resolve this problem, which has the potential to hamper service delivery and thereby cripple this sphere of government..
“It is my understanding that the KZN Growth Coalition and the chambers represent the interests of big business. It won’t be in the interest of business to operate in a municipality that is unable to pay for basic services such as water and electricity which is consumed by big business in large quantities,” said Mchunu.
“As of June 30, our municipalities owed Eskom for electricity about R42.4m and Umgeni Water Board was owed R166.6m for water.”
