Outlook for municipalities is bleak, Parks Tau tells Salga assembly

Tau said there was an urgent need to sort out the lingering challenges arising from the current fiscal framework.

“This must include consideration of the unsustainable and increasing debt owed to the municipalities. According to the first quarter Local Government Section 71 report, issued by the Treasury this past week, the aggregate municipal consumer debt amounted to R158.9bn as at September 30 2018 compared to R143.6bn reported in the first quarter of 2017/18 — a staggering increase of R15bn.”

The Treasury report also acknowledged that not all the outstanding debt of R158bn was realistically collectable, as these amounts were inclusive of debt older than 90 days, which translated to historic debt that has accumulated over an extended period, interest on arrears and other recoveries.

Tau said bold measure were needed to curb these debts and to ensure that municipalities collect and better manage their customers and that national interventions were initiated to ensure that this growing debt situation did not undermine the solvency of local government.

“These bold measures must include serious consideration to introduce legislation that will allow, in particular, the writing off of bad, realistically uncollectable debt against incentives such as the installation of prepaid meters to prevent recurrence,” said Tau.

There was also a need for a “fundamental rethink of the overall local government fiscal architecture” to ensure that under-capacitated municipalities were adequately resourced to perform their functions.

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