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News

Treasury crunches municipal numbers – See who owes who

Municipalities owed their creditors R38.9 billion as at 30 June 2016‚ an overall increase of R6.4 billion as reported in the fourth quarter of 2014/15.

Free State has the highest percentage of outstanding creditors greater than 90 days at 73.7 percent‚ followed by Mpumalanga at 69.4% and Northern Cape at 66.9% respectively.

 “The year-on-year increase in outstanding creditors could be an indication that municipalities are experiencing liquidity and cash flow challenges‚” the National Treasury said on Friday‚ when it released local government’s revenue and expenditure report.

On aggregate‚ municipalities spent 88.7 percent‚ or R335.9 billion‚ of the total adjusted expenditure budget of R378.6 billion as at 30 June 2016 (fourth quarter results for the 2015/16 financial year).

 Revenue-wise‚ aggregate billing and other revenue amounted to 93% or R346.9 billion of the total adjusted revenue budget of R373.1 billion.

Municipalities have adjusted the budget for salaries and wages expenditure to R84.3 billion for the 2015/16 municipal financial year‚ the report stated. This represents 27.1% of their total operational expenditure budget of R310.6 billion.

 Aggregate municipal consumer debts 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. Government accounts for 5.4% or R6.1 billion. The largest component relates to households which accounts for 65.2% or R74 billion (61.6% or R66.9 billion in the third quarter).

Treasury noted‚ however‚ that not all the outstanding debt of R113.5 billion is realistically collectable as these amounts are inclusive of debt older than 90 days — historic debt that has accumulated over an extended period — interest on arrears and other recoveries.

 If consumer debt is limited to below 90 days‚ then the actual realistically collectable amount is estimated at R22.9 billion.

Metropolitan municipalities are owed R56.7 billion (R54.4 billion reported in the third quarter) in outstanding debt as at 30 June 2016. This represents a decrease of R1.8 billion‚ or 3.1 percent‚ from the fourth quarter of the 2014/15 financial year.

 The City of Johannesburg is still owed the largest amount at R16.1 billion (R13.3 billion in the third quarter). This is followed by Ekurhuleni Metro at R11.7 billion (R11.6 billion in the third quarter)‚ City of Tshwane at R7.6 billion (R7.1 billion in the third quarter) and Cape Town at R7.3 billion (R7.4 billion in the third quarter).

Households in metropolitan areas are reported to 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.

Secondary cities are owed R24 billion (R23.8 billion reported in the third quarter of 2015/16) in outstanding consumer debt. The majority of debt is owed by households and amounts to R17.7 billion or 74 percent‚ an increase from the R17 billion or 73.1% reported in the previous quarter. Out of the total debt of R23.9 billion‚ R19.8 billion or 82.5% has been outstanding for more than 90 days.