Metro to write off billions in debt
The Tshwane metro intends to write off about R7 billion in outstanding debt.
Andrew Ngozo
The Tshwane metro has been accused of writing off nearly R7 billion in debt to improve its financial ratios even though this would hurt its liquidity.
And the DA also says this write-off will result in the encouraging of bad consumer behaviour.
DA councillor Lex Middelberg said, in principle, writing off bad debt was laudable as it was one way of bringing non-paying residents into the payment cycle, provided it was done properly.
“It must be part of a well-planned and properly executed credit management exercise. [As it is] the proposed write-off will reward those who fail to pay their accounts,” he said.
He warned the metro against rewarding bad behaviour instead of improving its cash flow.
Last month there was uproar when it was revealed that the metro planned to write off millions of indigent debt.
But DA councillor Abdul Osman said the metro was using the write-off to hide its failure to collect debt.
“The reality is that writing off the debt will significantly improve the financial ratios of council, even though the actual liquidity position will not be improved.
“For how long will such bad behaviour be tolerated?” he said.
He said the metro had failed to provide a coherent and logical justification for why it wanted to write off such a huge amount.
“Section 64 (2) (g) of the MFMA [Municipal Finance Management Act] states that the municipality charges interest on arrears, except where the council has granted exemptions,” said Osman.
He said a report the metro presented to council stated that over R1 billion was outstanding on 31 August.
“But the report is completely silent on how long the debt has been outstanding [for] and whether some of the debt had prescribed. The R1 billion merely represents 15% of all outstanding debt which translates to the total being R7 billion,” said Osman.
The problem has been further compounded by the fact that the Tshwane metro had been unable to collect outstanding debt even within a prescribed time.
Osman said the report stated that consumers were unable to enter into affordable repayment terms primarily due to large arrears.
“Thus arrangement plans over the approved 48 month repayment period are not affordable.
“Should the metro then not get involved before a write-off is necessary, and can the repayment term not be made over 36 months?” said Osman.
The credit policy was clear on the steps and procedures to be followed to declare an amount unrecoverable.
Osman said no evidence was presented by the metro to show that the policy had been adhered to. He added that the metro did not even bother to explain how many summonses it issued before declaring a debt irrecoverable.
Osman said only towards the end of the report was the real reason for the write-off revealed.
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