SA Govt and Residents’ debt has a paralysing effect on Municipalities

The amount owed to municipalities could seriously impact on their ability to deliver services, Cooperative Governance and Traditional Affairs Minister Lechesa Tsenoli said in Parliament on Thursday.

South African residents owe municipalities across the country an overall amount of R87 billion, while various government departments owe R4.2 billion in outstanding rates and taxes.

The amount owed to municipalities could seriously impact on their ability to deliver services, Cooperative Governance and Traditional Affairs Minister Lechesa Tsenoli said in Parliament on Thursday.

Unsurprisingly, municipalities are crying foul, saying that this defaulting compromises their revenue collection and ability to stay afloat.

Intergovernmental debt spat isn't limited to the department and municipalities. It includes other departments, especially education and health. According to national treasury, national and provincial government departments owe municipalities R4.2-billion in outstanding rates and taxes, which is 5% of the total municipal consumer debt.

South Africans owe almost R87-billion to the country’s 278 municipalities.

It meant municipalities would not have sufficient revenue to provide on-going services and improve on those that already exist.

Tsenoli blamed high levels of unemployment and the municipalities’ own ineptitude in collecting revenue for the high debt figure.

"One of the things that results from levels of poverty is many more people being unable to pay their rates; people have been losing their jobs," he said.

Tsenoli said weaknesses in the systems for collecting revenue also played a role. He added that his department, together with national and provincial treasuries, were helping municipalities to develop strategies for effective collection, especially the smaller municipalities.

"For a small municipality to be owed even R150 000 is a lot of money for the things they can do," he said.

"This is the debt that relates to the problem of municipalities being unable to effectively specify the monies owed to them by specific departments," said Tsenoli.

"It does make it difficult for departments to pay the amounts. In many instances there are conflicts about how much a department owes the municipality."

Commercial Property Owners Objecting Municipal Rate Increases

Meanwhile the continued rise of municipal rates in the South African Commercial Property sector is worrying property service companies, as it is exerting strain on business and the economy.

Briefing SA Commercial Prop News on Tuesday, the South African Property Owners Association (Sapoa) questioned the legality of increased municipal rates charged to its members, saying random rate increases were not based on logical reasoning and were highly irregular.

SAPOA represents around 1,200 companies and organisations. Its members control about 90% of all commercial, retail, office and industrial properties in SA to the value of approximately R300 billion.

The Commercial Real Estate body said its members have seen rates increase on average 23% for the year. Further, over the past 5 years members have complained about total rates increases of raging between 43% and 500% for the period.

“Not only is this unsustainable, but property owners pass these increases through to tenants, which has a material impact on the health of businesses in the economy,” says SAPOA President Estienne de Klerk.

“Further, property owners are providing various ’undelivered’ municipal services for themselves and their tenants via City Improvement Districts, at extra expense to the sector. The ongoing rates increases for commercial property simply make no sense," he said.

Mr de Klerk said his body would not take legal action yet. The group wanted to discuss with municipalities how to create a fair rate setting policy first.