Top 10 defaulting municipalities to face Scopa

This follows a meeting yesterday with Eskom, the SA Local Government Association (Salga), the department of cooperative governance and traditional affairs (Cogta) and National Treasury to find a way for departments to work together to resolve a R14 billion impasse.

According to Jabu Mabuza of Eskom, money owed to the utility increased from R9.407 billion as at March 31 2017 to R13.886 billion at April 30 this year. Soweto alone owed the power utility R15.426 billion, while an agreement had been reached to write off the debt if Eskom could install smart meters.

It had done so for 122 182 customers to date in Soweto, despite “some challenges”, noted Eskom official Ayanda Noah.

“These obstacles included community unrest.”

Noah said a “country plan” was needed to address the culture of nonpayment, adding that Eskom would be going on a marketing drive and looking at other ways to incentivise municipalities to pay.

Salga deputy president Sebenzile Ngangelizwe said his association had tried for four years to help Eskom and nonpaying municipalities, and in the process had found policy gaps that Salga tried to rectify. However, Eskom had refused to sign a service delivery agreement (SDA).

Salga’s investigation found that the constitutional authority of municipalities had been undermined by Eskom for years and, in the absence of an SDA, municipalities were unable to levy surcharges in Eskom supply areas and were unable to exercise credit control in these supply areas.

However, the problem appeared to be that municipalities simply did not have the money. In a written response to a question by DA MP Kevin Mileham, of 257 municipalities, Finance Minister Nhlanhla Nene said 112 of them were not funded according to Treasury’s assessment.

“When matching the ‘cash and cash equivalents’ for [the second quarter ended December 31, 2017] against the ‘total creditors’ for the same period, it showed that municipalities with unfunded budgets are not able to pay their total creditors within the prescribed 30-day period,” Nene said.

North West is the first province to come under national control, while Cogta is currently managing the beleaguered Maluti-a-Phofung Local Municipality in the Free State, as well as most of the municipalities in North West.

Cogta said Treasury’s financial analysis of municipalities had shown they owed suppliers R41.2 billion as of December 31 2017.

This included bulk water: R7.3 billion; bulk electricity: R16.2 billion; and other creditors: R17.7 billion.

Treasury director-general Dondo Mogajane noted that collection rates for almost all municipalities were overstated when compiling budgets and most presented an operational deficit where expenditure exceeded revenue.

He noted that many of the distressed or dysfunctional municipalities were often those that had adopted unfunded budgets and lacked effective internal controls, had poor cash flow management, and struggled with operational inefficiencies.

Poor leadership and weak financial management led to mismanagement of finances, which in turn allowed the debt to escalate, Mogajane noted.

This was also put down to weak political leadership.

Scopa chair Themba Godi said municipalities would be called before the parliamentary recess on June 18. – news@citizen.co.za

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The top 10 debt-riddled municipalities

• Maluti A Phofung, (R2.8bn)
• Matjhabeng (R1.8bn)
• eMalahleni (R1.6bn)
• Ngwathe (R936m)
• Emfuleni (R606m)
• Govan Mbeki (R517m)
• Lekwa (R491m)
• Thaba Chweu (R431m)
• Ditsobotla (R293m)
• Naledi (R280m).