Gauteng Municipal Debt Grows by R1,6 bn

Debt owed to Gauteng Municipalities increased by R1,6 billion in the quarter from January to end March 2011. This is only debt older than 90 days. This was revealed in the latest consolidated municipal statements published in the Gauteng Provincial Government Gazette (27 June 2011).

Total debt owed to municipalities for longer than 90 days increased from R 20,588bn at end December 2010 to R22,212bn at end of March 2011. The municipalities in Gauteng are owed as follows (note all amounts are for 90 days plus).

• Johannesburg: R 8,389bn
• Ekurhuleni: R 7,198bn
• Tshwane: R 2,759bn
• Emfuleni: R 1,869bn
• Mogale City: R 558,635m
• Merafong: R 490,813m
• Kungwini: R336,440m (now disestablished, amount should be added to Tshwane Metro)
• Randfontein: R 209,799m
• Lesedi: R 129,594m
• Nokeng tsa Taemane: R123,876m (now disestablished, amount should be added to Tshwane Metro)
• Westonaria: R 94,077m
• Midvaal: R 54,661m
• West Rand District: R 3,980m
• Sedibeng District: R1,768m
• Metsweding District: R nil (now disestablished, amount should be added to Tshwane Metro)

The seriousness of the growth in debtors owing for more than 90 days cannot be underestimated as the bulk of these debts are usually not recovered. R 22bn can make a huge difference in the cash flow and liquidity of Gauteng municipalities and improve their ability to deliver services in Gauteng.

An encouraging sign is the reduction in the debt owed to municipalities between 31 and 60 days which could be an indication of improved collection rates among Gauteng municipalities.

Disconcerting, however, is the reduction in current debt owed to municipalities which could indicate a lack of growth in income among these municipalities. Also of concern seems to be the conversion of debt older than 60 days to 90 days plus which becomes very difficult to recover.

However, if municipalities continue to improve their collection rates before the 60 day period has expired, the 90 days plus debt should grow much slower in future. This once again highlights the importance that should be placed on improved financial management at municipalities and how crucial it is to appoint suitably qualified people in financial management positions.