Provincial departments owe EC municipalities nearly R1 billion

Issued by Dr Vicky Knoetze, MPL
Shadow MEC for COGTA

Provincial departments are hastening the financial collapse of Eastern Cape municipalities, by failing to pay close to a billion rand owed for services rendered.

At a time when our economy is in crisis, the cost of living is spiralling upwards and municipal collection rates have been decimated, it is utterly irresponsible of provincial departments to expect local government to carry millions of rands in debt.

In response to a parliamentary question, COGTA MEC, Zolile Williams, revealed that, as of the end of August, these departments owed local municipalities R915 million of which nearly R600 million is older than 30 days.

Earlier this year, a report to the National Portfolio Committee of Cooperative Governance on the State of Local Government revealed that of the 39 municipalities in the Eastern Cape, 11 are regarded as dysfunctional, 14 as high risk and just 14 as low risk.

By failing to pay, these departments are depriving residents of basic services, as municipal cash flows are severely disrupted. Water, sanitation and electrical infrastructure are collapsing as there are no funds available to maintain them, which in the long run results in a lack of investment, job opportunities and poverty.

MEC Williams revealed that the largest offender, by far, were the Departments of Public Works, Road and Transport, which collectively owed in excess of R700 million, and of which over R132,5 million was monies owing for more than a year!

Other serial offenders include the departments of Health, with R69 million owed, and Education, with R54 million owed.

The total debt breakdown is as follows:

Rural Development and Agrarian Reform R 40, 647 million
Education R 54, 034 million
Health R 69, 121 million
Human Settlements & Local Government R 20, 314 million
Public Works/Roads and Transport R 700, 799 million
Social Development R 1, 756 million
Other R 28, 489 million
Total Debt R 915, 161 million

Municipalities owed the most include:

Buffalo City Municipality R 247, 825 million
Nelson Mandela Bay Municipality R 185, 269 million
Matatiele Local Municipality R 110, 946 million
Umzimvubu Local Municipality R 46, 210 million
Mhlontlo Local Municipality R 42, 003 million
Inxuba Yethemba Local Municipality R 34, 945 million
Winnie Madikizela Local Municipality R 33, 921 million

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MEC Williams said the four main reasons for non-payment included budget constraints due to Covid, disputes in terms of certain amounts owing, lengthy periods for account reconciliation and negotiations in terms of the waiver of interest due.

As provincial departments face severe pressures on their own budgets, it appears to have become common practice to simply pass some of the financial burdens to local government, rather than implement austerity measures and adjust their spending patterns.

This cannot be allowed to continue. In terms of the Public Finance Management Act (PFMA), departments must settle all contractual obligations and pay all money owing, including intergovernmental claims, within the prescribed or agreed period.

The DA is calling on MEC Williams to ensure that payment arrangements are made with each department, for all debt older than 30 days, per municipality. We will continue to fight for good governance and accountability so that the people of this province get the best possible value from their government.