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Defaulting Municipalities Impact South Africa’s Service Delivery

Debt owed to South African towns and cities almost doubled over the past five years, weighing on municipal finances and increasing the risk that the supply of basic services such as water and electricity will be disrupted. Consumers owed municipalities $14.8 billion by the end the financial year through June 30, according to data the National Treasury published on Friday. Households account for 71% of this. Of the outstanding debt, 86% is older than 90 days and may therefore not be realistically collectible. South African city councils struggle to collect payments for services from consumers and in turn can’t pay their suppliers. That’s led to state-owned power utility Eskom Holdings SOC Ltd. threatening to cut off electricity until it’s paid. Municipalities owed their creditors 89.7 billion rand by June 30, up from 81.1 billion at the end of March, according to the Treasury. Town councils’ debt to Eskom alone was 49.1 billion rand by the end of July, Deputy President David Mabuza said last month.

SOURCE: BLOOMBERG