MEC: Municipalities can also play hard ball

Could cut-off services to owing departments

Municipalities might have to resort to drastic measures such as cutting power supplies to consumers, including government departments, defaulting on electricity and other bills should national treasury refuse to back down on its decision to withhold funding to the local authorities.

Cooperative governance and human settlements MEC Olly Mlamleli said such a move would be necessary if municipalities are to raise money to pay their debts to Eskom as demanded by treasury.
Treasury has withheld equitable share grants from 56 municipalities across the country including 13 in the Free State saying they must first pay the more than R12 billion they owe Eskom and bulk water suppliers. It said should municipalities fail to pay up it would use the money totalling R12.6 billion to pay the local authorities’ dues to the power firm and water suppliers.

The municipalities have already indicated through their South African Local Government Association (Salga) that they might have to go to court to force treasury to release the money, which is their share from nationally collected government revenue and is not subject to any conditions before it is released to them.

But Mlamleli warned that if national treasury does not reconsider the decision municipalities would have to resort to cutting services such as water and electricity from all consumers including government institutions.

The country’s municipalities are currently owed about R96 billion for services like water, sanitation, electricity, waste management, as well as rates and taxes by consumers. Approximately R5.4 billion of this amount is owed by government departments.
“Since there will be no money coming from the national treasury, municipalities are gearing up to take legal action against those owing them,” said Mlamleli.

“They will also switch off electricity and water in place like hospitals, government departments and schools in order to collect enough revenue,” added the MEC.

Mlamleli however said this will be a last resort as municipalities are still trying to find ways of filling the funding gap after the withholding of funds from equitable shares.

She said those funds were the only money available to municipalities to pay for bulk utility services such as electricity and water and if those funds were not available, the municipalities had to find other ways such as collecting outstanding debts in order to raise the money.
“We must also remember that the municipalities are now unable to pay their debts to Eskom because households and some government departments and private companies are not paying for their electricity.

“As a provincial government we are saying, all parties affected must first consider what the reality on the ground is. Taking away the equitable shares is not a solution to the problem, but it will (financially) cripple the municipalities and render them worthless,” Mlamleli added.

The municipalities struggle to collect revenue from residents because most of them are indigents and cannot afford to pay for services. This means the municipalities rely entirely on the equitable share to provide water and electricity.
Mlamleli said while the provincial government acknowledged that municipalities must pay their debts to Eskom, it was also important to consider the challenges faced by the municipalities that have made them fail to pay Eskom.

“After making commitments to Eskom to pay their debts, most municipalities have seen their populations continuously growing through mushrooming of informal settlements. So they have to provide water and electricity to these areas without proper planning,” Mlamleli explained.

Mlamleli made a call to national treasury to “go back to the drawing board” and reconsider their decision.
“The letter that municipalities received stated that national treasury would take 70 percent of their equitable share, but now treasury decide to take 100 percent,” said Mlamleli.

Meanwhile, the Salga has said it could launch a court application to force national treasury to release the equitable share funds it is refusing with, saying the continued refusal to release the money was hitting hard on municipalities many of which were already cash-strapped.

“National treasury must play an active role in supporting municipalities to recover their debt by taking a similar approach with defaulting provincial and national departments,” said Salga in a statement.
“Funds owed by these departments should be channelled directly to municipalities so that they can pay their debts to Eskom,” added Salga.

In the statement the association encourages municipalities to immediately implement credit control measures to recover debts from government departments. The municipalities are instructed to issue notices to defaulters to demand payment.
But municipalities were also advised to find means of cushioning the poor who receive free basic services.

Out of the 13 municipalities in the province only Dihlabeng had its payment plan to Eskom accepted.