South Africans owe municipalities billions of rands in debt for basic services such as electricity and water – which has been outstanding so long, that it’s not realistically collectable.
Worse yet, with the current economic path the country is taking, consumers are set to face added pressure in the fourth quarter.
According to the latest Local Government Revenue & Expenditure report by National Treasury, South Africa’s eight biggest municipalities are owed over R56.7 billion by households and businesses.
The outstanding debt is attributable to unpaid fees for municipal services such as electricity and water. Three quarters of the total is overdue by 90 days or more.
The City of Johannesburg is the biggest culprit, where just over R16 billion is owed. This is followed by Ekurhuleni, where residents and businesses owe R11.9 billion.
This is how the top 8 municipalities stack up (amounts rounded):
- City of Johannesburg – R16.1 billion
- Ekurhuleni – R11.7 billion
- Tshwane – R7.6 billion
- City of Cape Town – R7.3 billion
- eThekwini – R5.9 billion
- Mangaung – R3.5 billion
- Nelson Mandela Bay – R3.0 billion
- Buffalo City – R1.7 billion
The data shows that households in metropolitan areas account for R35.6 billion or 62.7% of outstanding debt to metros, followed by businesses which account for R17.7 billion or 31.1%.
Debt owed by government agencies is approximately R1.7 billion or 2.9% of the total outstanding debt owed to metros.
Aggregate municipal consumer debts (across all municipalities) amounted to R113.5 billion(compared to R108.6 billion reported in the third quarter) as at 30 June 2016. A total amount of R4.1 billion has been written off as bad debt.
However, It needs to be acknowledged that not all the outstanding debt of R113.5 billion is realistically collectable as these amounts are inclusive of debt older than 90 days.
If consumer debt is limited to below 90 days, then the actual “realistically collectable” amount is estimated at only R22.9 billion, Treasury said.
South Africans are increasingly feeling the pressure of crushing debt in the country, with a new survey showing that 42% of 6,000 respondents are stressing about their debt situation.
The country’s economy has been hit by a turbulent 2016, with a weakening economy exacerbated by political turmoil and global events. Economists and analysts do not hold much hope for the remainder of 2016, where a number of political shocks are anticipated, which will have dire consequences for the economy.
According to economist Dawie Roodt, if “an inevitable downgrade” materialises from global ratings agencies in December – as is expected – many consumers are “going to experience a great deal of pain”.
“The downgrade will mean that interest rates will inevitably rise as will inflation. Depending on the actions and utterances of our esteemed President Jacob Zuma, the economy could go into a total tailspin with disastrous consequences for consumers,” he said.
Source: Business Tech