19 May 2017

South Africa: Minister Van Rooyen - Debtors Must Pay Municipalities

Pretoria — The trend of rising debt owed to municipalities is something that needs to be urgently addressed, as the culture of non-payment is "becoming a pandemic".

"The Department [of Cooperative Governance] is gravely concerned about the excessive growth of debt owed to municipalities to the tune of R117 billion, as at 31 December 2016. National departments owe municipalities R2.3 billion, while provincial departments owe municipalities R3.1 billion.

"As of the end of December 2016, the total creditor's amount was R34.6 billion, of which Eskom and water boards were owed 77%," said Cooperative Governance and Traditional Affairs Minister Des van Rooyen on Thursday.

Delivering his department's 2017 Budget Vote Speech in the National Assembly on Thursday, Minister Van Rooyen said, however, that the work of the National Task Team on Government Debt is making progress in resolving the historical debt and government departments have made commitments to adhere to their current debt.

He said the culture of non-payment has also extended to municipalities, as some of them have become persistent defaulters to their creditors.

"Poor revenue management has meant that payments due to creditors far exceed the revenue collected. The department is working with municipalities to implement municipal specific revenue plans in order to ensure proper internal controls to protect revenue and improve collection.

"The focus of this project is to review municipal tariffs for electricity and water, which are not cost reflective, and to identify and put measures in place to curb the theft/losses of electricity, which equates to as much as 50% of purchases in some cases," he said.

In 2016, the department drew up recovery plans and improved municipality payments to Eskom. However, while somewhat successful, they did not resolve all the challenges faced by municipalities.

Minister Van Rooyen said together with the Minister of Public Enterprises, they have set up a task team including the Department of Public Enterprises, Eskom, Cooperative Governance and Traditional Affairs, South African Local Government Association and National Treasury to find solutions to the challenges faced by municipalities who owe Eskom.

An Inter-Ministerial Task Team is also attending to the Constitutional complication on the "dual competency" for Eskom and municipalities, when it comes to electricity distribution and reticulation. As it is, both Eskom and municipalities can distribute electricity.

Municipal Infrastructure Grant (MIG)

Under the MIG, Minister Van Rooyen said in the 2015/16 financial year, ending June 2016, 131 337 households benefitted from the provision of water infrastructure. A total of 134 327 households benefitted from the provision of sanitation infrastructure.

Spending on the MIG resulted in the provision of community lighting to 136 786 households; upgrading, maintenance and provision of 2 150 kilometres of roads and storm water drainage; the development of 10 waste facilities and 76 community or public facilities, and provisions were made for 221 sport and recreation facilities.

"All this work created 161 697 jobs in the previous financial year. A total number of 1 362 project site visits were conducted nationally in 2016/17 to verify projects being implemented by municipalities.

"The MIG annual allocations over the 2017 MTEF includes an amount of R900 million, which is allocated outside of the grant formula and earmarked for specific sport infrastructure projects identified by Sport and Recreation South Africa," Minister Van Rooyen said.

Municipalities are required to spend 4.5% on sport and recreation infrastructure, which is identified in their own Integrated Development Plans.

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