Salga says municipal debt should be written off

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Mixed denomination rand currency banknotes are arranged for a photograph at a First National Bank (FNB) branch in Johannesburg, South Africa, on Friday, March 15, 2013. A recovery in mining and manufacturing is giving South Africa's rand and bonds a breather amid concern that growth is slowing while inflation accelerates. Photographer: Nadine Hutton/Bloomberg via Getty Images

Municipal debt should be written off and strict measures for a better collection system put in place‚ the South African Local Government Association (Salga) has proposed.

On Wednesday‚ Simphiwe Dzengwa‚ Salga’s executive director‚ said at the Business Day Dialogues‚ presented with Salga in Johannesburg‚ that some of the municipal debt is historical debt.

SA’s municipalities are owed R128.3bn as at March 31 2017. R1.6bn has been written off as bad debt. The government accounted for 5.1% or R6.6bn‚ as was reported by Treasury in its Local Government Revenue and Expenditure: Third Quarter Local Government Section 71 Report.

The largest component related to households‚ which accounted for 67.1% or R86bn.

The report made it clear that not all the outstanding municipal debt is realistically collectable as it includes debt older than 90 days‚ interest on arrears‚ and other recoveries. If consumer debt is limited to less than 90 days‚ the realistically collectable amount is estimated to be R24.1bn‚ the report said.

Dzengwa told Business Day on the sidelines of the event that prospects for the money being recovered are slim‚ and that Salga feels some of the historical debt should have been written off after a prescribed period. Some of the debt is also made up of interest which is not recoverable.

He said Salga would present this on a number of platforms‚ engage‚ “and lobby that we write this off. We are putting a rider that writing [it] off should be accompanied by strict measures put in place for a better collection system”‚ adding that pre-paid meters would be one of those measures.

“We are not saying that debt should be written off and nothing put in place. We also encourage communities to have a serious discussion on this matter. We think it will be a win-win for everyone.”

Dzengwa said debt could not be written off with people then continuing not to pay for services they receive.

BY CLAUDI MAILOVICH – BusinessLIVE

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