The South African Local Government Association (Salga) is concerned about the financial sustainability of municipalities amid growing consumer and government debts.
Salga recently alerted the public on the state of municipalities at a media briefing. It revealed that government departments’ debt to municipalities was now standing at R3 billion. The highest it has ever been.
Salga’s KwaZulu-Natal chairperson Thami Ntuli detailed the state of municipalities. He said they are generally battling to collect what is owed in services because of the prevailing difficult economic conditions in the country, and are falling into massive, high-interest debt, with municipalities forced to borrow money to cover their shortfall.
“The financial system within which municipalities operate is increasingly indebted, and has reached record debt-levels. Citizens, the government, and businesses owe municipalities mainly for water and rates, which are the hardest to collect.
“When homeowners use up all their disposable income to service bond repayments, they need to keep up with their rates and taxes. Salga in KwaZulu-Natal notes interest rate increases negatively impact municipalities and their ability to provide services to communities, and pay their suppliers,” said Ntuli.
He said the timing of interest rate hikes could not have been worse for municipalities because it is compounded by a grave need to borrow money to cover the shortfall of non-payment by the government, business and households.
Ntuli said the debt owed by government departments was a major headache for municipalities.
“Government debt for municipal services in KZN has now passed the R3 billion mark for the first time in the history of this province.
“When governments and businesses fail to pay or delay paying for the water, lights, rates and refuse removal services they receive, municipalities often have to secure commercial bank loans to ensure that projects do not grind to a halt,” he said.
The Mercury