Municipalities are owed over R230bn - and it won’t all be collected, says Treasury

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Treasury released the local government revenue and expenditure report for the third quarter.
Treasury released the local government revenue and expenditure report for the third quarter.
  • Municipalities were owed R230.7 billion from consumers, Treasury's local government revenue and expenditure third-quarter report shows.
  • Treasury said not all of the outstanding debt is realistically collectible and about 32% or R73.7 billion has already been written off as bad debt.
  • Municipalities have also been underspending on their budgets.

Municipalities are owed R230.7 billion for consumers, and not all of the debt is "realistically" collectible, said National Treasury.

Treasury this week released the local government revenue and expenditure report for the third quarter. The report covers the period 1 July 2020 to 31 March 2021.

It shows that 32% or R73.7 billion of outstanding debt has been written off.

Treasury said that not all of the outstanding debt is collectible as the R230.7 billion includes historic debt (older than 90 days), as well as interest on arrears and other recoveries. If consumer debt is limited to below 90 days, the actual realistically collectable amount is estimated to be R36.5 billion, according to Treasury. The debt is mainly owed by households, and government accounts for 6.7% or R15.5 billion of the debt.

In turn, municipalities owe their creditors R65.5 billion; this is 2.5% lower than recorded in the second quarter. However, Treasury is concerned about the debt in excess of 30 days, particularly for bulk electricity and water, trade creditors and loan repayments.

"Municipalities in the Free State have the most outstanding creditors greater than 90 days at R15.4 billion, followed by Mpumalanga at R12.3 billion and Gauteng at R6.6 billion," the report read.

Underspending on budgets

The report shows municipalities also underspent on budgets. Expenditure was only 65.3% of the budgeted R494.5 billion. Actual revenue also fell short of the budgeted R488 billion. According to the report, revenue was over a quarter (26%) lower than budgeted at R358.6 billion.

Treasury also noted low capital spending and warned it has "potentially serious implications" for government to meet targets such as access to water, sanitation, electricity, housing and job creation.

During the period, Treasury also published gazettes to stop the transfer of allocations, in anticipation of underspending by municipalities on certain programmes. Six grants were affected, including the Water Services Infrastructure Grant and Integrated National Electrification Programme.

"The stopping has affected 106 municipalities across all provinces, while 152 municipalities reflected underspending as at the end of the second quarter of the financial year," the report read.

Some of the reasons for underspending include non-appointment or late appointment of service providers and delays in housing projects that resulted in no houses to electrify, Treasury said. Stopped funds were instead reallocated to municipalities that had fast-tracked the implementation of projects and consequently also had accelerated their expenditure, Treasury said. 

Treasury noted that the Covid-19 pandemic had impacted grant performance. "The general observation is that conditional grant spending is poor," Treasury said.

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