NEWS & ANALYSIS

Gauteng municipalities collapsing – FF Plus

Party says residents who do not pay for services owe the municipalities in Gauteng around R56,6bn

Gauteng municipalities collapsing

2 July 2018

The shocking revelations made last Friday in the Gauteng Legislature by the Gauteng MEC for Local Governance, Mr Uhuru Moiloa, are a clear indication that Gauteng municipalities are collapsing and that many others will soon follow in the footsteps of the Emfuleni Local Municipality, which was placed under provincial administration.

Residents who do not pay for services owe the municipalities in Gauteng around R56,6 billion and R46 billion of this is more than 90 days overdue.

Of the outstanding R56,6 billion, businesses owe R7,7 billion and households R46,4 billion. As a result, the municipalities are experiencing cash-flow problems and are thus unable to pay the accounts of service providers, like Eskom and Rand Water.

This tendency worries the FF Plus and the party had cautioned the Gauteng government in 2015 already to implement measures that will ensure that all residents pay for their municipal services seeing as municipalities simply cannot afford to deliver services free of charge.

At that time, the FF Plus also warned that the small group of Gauteng residents who do pay their municipal accounts, levies, taxes and motor vehicle licenses faithfully is getting smaller and that the Gauteng government and municipalities are milking the cash cow dry.

Furthermore, the FF Plus forewarned the Gauteng government by saying that it must not allow the province to turn into a charity province as there will come a time when the paying residents are no longer able to carry the load of the non-paying residents. That time has now come for Gauteng.

The Emfuleni Municipality has already fallen into that trap and it has, therefore, been placed under administration. The municipalities that will soon follow in its footsteps are: Merafong, Rand West and Mogale City.

Mogale City was unable to pay its outstanding account to Rand Water last week and the account is now 30 days overdue. The account is in arrears with R17,9 million and a further R19,5 million is outstanding. The total amount that Mogaly City owes Rand Water thus amounts to R37 million.

Mogale City offered to pay Rand Water R7 million by Friday the 29th of June 2018 and another R30 million during this week. On top of that, the other two municipalities, West Rand and Merafong, have lost a total of R100 million as a result of making unauthorised investments in VBS Bank.

According to FF Plus councillors in Mogale City, the municipality obtained an overdraft facility of more than R100 million. The FF Plus wants to warn the municipalities that are borrowing large amounts of money from financial institutions to pay service providers that it will not solve the problem, but only serve to make it worse seeing as the interest rates of these loans are very high and, therefore, the municipalities will not be able to pay off the debt. In effect, they will have debt on top of debt. That will put even more pressure on the municipalities to remain functional.

The FF Plus is of the opinion that this could result in other struggling municipalities, like Mogale City, Rand West and Merafong, being placed under provincial administration before the end of 2018 as well.

Issued by Philip van Staden, FF Plus MPL: Gauteng Legislature, 2 June 2018