KZN’s municipal debt timebomb

2010-07-30 00:00

MUNICIPAL debt in KwaZulu-Natal is spiralling out of control. Total debt grew by R300 million from December 2009 to R8,2 billion by March 2010. This is not the full amount owing because nine municipalities did not report on their debtors.

Tabling the municipal budget performance review for the third quarter in the KZN Legislature yesterday, MEC for Finance Ina Cronje painted a bleak picture.

She said spiralling debt and poor spending on capital budgets are seriously affecting service delivery.

She pointed out that the information presented is based on what was provided by municipalities.“There is still some data outstanding and the credibility and accuracy of some information provided remain questionable.”

Cronje said the bulk of errant debtors are not government departments. Most of the the debt is owed in respect of the Property Rates Act and the group that owes the most consists of households (38%).

She said the deteriorating debt situation could be attributed to the economic recession or to poor credit control within municipalities.

Cronje said her department is concerned because 60% of the debt is more than 90 days overdue. This is the case in all municipalities, including eThekwini Metro.

The only exception is uThungulu District. She said the situation is a clear indication that municipal debt is “spiralling out of control”.

The debts could eventually become irrecoverable to the detriment of service delivery and the liquidity of municipalities, she warned.

Municipalities that did not report on their debtors were Vulamehlo, uMshwati, ­uMzumbe, Ezinqoleni, Impendle, Imbambazane and Maphumulo.

Cronje reported that many local governments are failing to spend their capital budgets. She said that by the end of March 2010, municipalities had spent about 64% of their capital budget and that this was well below the straight line projection benchmark of 75%.

The MEC said this is a cause for concern. “Municipalities will have to address poor expenditure planning. An Arabic proverb says, ‘Time is like a sword, if you did not cut it, it will cut you’,” said Cronje.

She told municipalities that infrastructure delivery needs to be planned well before the beginning of the municipal financial year.

“Late planning, coupled with a delay in finalising supply chain management processes, will without doubt result in unwise spending and under-spending where it is most needed. Not only does under-spending deprive our people of service delivery, but it also exacerbates the current backlogs,”she added.

Cronje was sceptical of municipalities that report over-expenditure on their capital budgets, such as Ubuhlehbezwe (136,4%) Big Five False Bay (112%), Msinga (104%) and Indaka (100,5%). Cronje said only Indaka uploaded its adjustment budget figures, and an accurate analysis could not be done on expenditure by the other three.

She said this supports the view that the data provided by some municipalities may not be credible. “One does not always know whether you look at a balance sheet or a balance cheat!”.

The MEC tabled her report shortly after the Premier, Dr Zweli Mkhize, reported on the province’s successful hosting of the Football World Cup.

 

 

 

 

 

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