South Africa’s Towns Owed $17 Billion, Face Revenue Squeeze

Rene Vollgraaff
·1-min read

(Bloomberg) -- Debt owed to South African towns and cities jumped to more than 300 billion rand ($16.5 billion) in the final quarter of last year, adding to the financial woes of municipalities that are struggling to meet revenue targets amid persistent power cuts.

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Consumers owed municipalities 305.8 billion rand by Dec. 31, compared with 261.5 billion rand a year earlier, with households accounting for 71% of the total, data published by the National Treasury on Monday show. About 84% of the arrears has been outstanding for more 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 battle to pay suppliers, including state power utility Eskom Holdings SOC Ltd., which has threatend to cut off their electricity supply. Municipal revenue has also been hit by Eskom’s inability to meet demand for energy, a situation that’s set to worsen as increasing numbers of consumers who can afford to go off the grid.

Finance Minister Enoch Godongwana last month announced tax rebates for individuals who install new solar panels at private residences and expanded incentives for businesses. A strong takeup could remove most paying customers from the municipal electricity distribution network, Business Day newspaper reported, citing South African Local Government Association Chairman Lesetja Dikgale.

Revenue earned by the country’s eight largest municipalities from energy sales fell 6.5% in the quarter through Dec. 31 from a year earlier, and for the 19 secondary cities it slumped 17.4% , Treasury data show.

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