Municipal debt soars past R416b as households struggle to pay
South African municipalities are under growing financial pressure, with consumer debt and unpaid bills climbing steeply and collection rates falling short of expectations, according to the latest report from National Treasury.
As of March 31, total consumer debt owed to municipalities amounted to R416.1b, compared with R347.6b reported in the same period in 2023/24.
This is according to a report released by National Treasury on local government revenue and expenditure for the third quarter of the 2024/25 financial year.
'A total amount of R10.8b or 2.6% has been written off as bad debt. The largest component of this debt relates to households and represents 72% or R299.5b (73% or R253.6b in the same period in 2023/24 financial year),' National Treasury said yesterday.
The third quarter publication covers 257 municipalities on financial information and conditional grant information.
'The government debt accounts for 6% or R24.9b (R21b reported in the same period in 2023/24) of the total outstanding debtors.
'Total outstanding creditors owed by municipalities as at March 31 amounts to R131.8b, an increase from R106.7b reported in the same quarter in 2023/24. R111.8b or 84.8% has been outstanding for more than 90 days,' said National Treasury.
Provinces with the highest percentage of outstanding municipal creditors in the category greater than 90 days include the Free State at 94.4%, Mpumalanga at 93.9%, the Northern Cape at 93.8% and the North West at 84.4%.
An increase in outstanding creditors could be an indication that municipalities are experiencing liquidity and cash challenges and consequently are delaying the settlement of outstanding debt owed.
'Analysis of the collection rates indicates that while municipalities' average collection rate on the adjusted budget is 85%, the aggregated actual collection against billed and other revenue is only 63.6%. The metros budgeted (adjusted budget) for an 87.9% collection rate and collected only 58.2%. The secondary cities budgeted billing was 86.3% and the actual collection was 69.7%,' it explained.
Municipal spending
As at March 31, aggregate spending by municipalities was at 64.9% or R432.2b of the total adjusted expenditure budget of R665.9b.
'Aggregated billing and other revenue was 71.7% or R478b of the total adjusted revenue budget of R666.8b.
'Capital expenditure was R26.4b or 33.6% of the adjusted capital budget of R78.5b.
'The adjusted operating expenditure budget was R587.5b, of which R405.8b or 69.1%) was spent by March 31.'
Municipalities adjusted their salaries and wages (including remuneration of councillors) budget from R162.6b in the adopted budget to R161.1b in the adjusted budget for the 2024/25 financial year, representing a R1.5b or a 0.9% decrease.
The budget for salaries and wages constituted 27.4 % of the total adjusted operating expenditure budget of R587.5b.
As at March 31, R114.2b or 70.9% of the adjusted salary budget was spent.
Conditional Grants
As at March 31, municipalities were allocated R44.7b for direct conditional grants, of which R38.9b has been transferred.
This amount excludes the Equitable Share allocation, Urban Settlements Development Grant as a supplementary capital allocation to metropolitan municipalities, as well as indirect grants.
National transferring officers (NTOs) reported spending of R25b, or 55.9%, while municipalities reported spending of R19.5b or 43.7% of the total allocation.
In comparison, during the same period in the previous financial year, NTOs reported 58.8% against the total adjusted allocation for direct conditional grants, while municipalities reported expenditure of 46.8 %.
'There are several factors that attributed to the overall underspending of the conditional grants by municipalities during the 2024/25 financial year. Some of these factors include late submissions of business and implementation plans, which hindered timely implementation, while persistent supply chain management challenges disrupted procurement processes.
'These issues not only affected grant performance in the third quarter but also led to reduced allocations for many municipalities during the adjustment budget process, as uncommitted funds were reallocated to better-performing municipalities.
'The impact of these challenges highlights the need for stronger municipal planning, more efficient SCM systems, and stricter enforcement of procurement regulations to prevent similar underspending in the future.'
National Treasury said the third quarter infrastructure grant performance presents a mixed picture, with R23.8b (56.3%) expended from the R42.8b allocation.
'While showing moderate overall progress, significant disparities exist between better-performing grants and those facing implementation challenges. While this demonstrates moderate progress, the performance varies considerably across different grants, with some showing effective implementation and others lagging behind.
'While some grants such as the Integrated Urban Development Grant, Municipal Infrastructure Grant and the Regional Infrastructure Grant demonstrate efficient spending with expenditure over 60% by the end of the third quarter, others like the Municipal Disaster Recovery Grant and the Water Services Infrastructure Grant remain severely underperforming.
'This inconsistency highlights the need for a more balanced approach in grant management, such as rewarding well-performing municipalities with additional support while imposing stricter consequences for chronic underspending. Without urgent corrective measures, critical service delivery backlogs will continue to worsen,' National Treasury said.
Further details on this report can be accessed on the National Treasury's website. – SAnews.gov.za
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