Photo by: Bloomberg
National Treasury has taken a hardline stance against 60 municipalities that have failed to pay State-owned power utility Eskom and other service delivery creditors by halting the transfer of funds.
As at December 31, municipalities aggregately owed around R9-billion to Eskom, half of which was arrears, and R3.6-billion – R2.3-billion relating to arrears – to water boards.
“The persistent failure by some municipalities to pay creditors within 30 days amounts to financial mismanagement and National Treasury deems it important to take steps to ensure that municipalities meet their financial commitments,” it said in a statement on Tuesday, announcing that the transfer of the municipalities’ equitable share had been stopped on March 20.
While Treasury’s decision to invoke Section 216 (2) of the Constitution would likely impact the municipalities’ ability to meet some of their financial obligations, the government department was firm on its stance that financial mismanagement could not be condoned “under any circumstances”.
“Transfers will, therefore, only be released once all the requirements as communicated to municipalities are met. This includes a formal repayment arrangement between both parties,” it assured.
Treasury would aid the struggling municipalities to prepare a recovery plan incorporating budgeting and revenue management risks and ensure proper municipal billing and collection was implemented.
“An intense approach to revenue management will substantially reduce [the R22-billion] debt owed by all customers and, in particular, businesses,” Treasury said, noting that the process would also enable municipalities to more effectively collect the R4-billion owed to them by national and provincial government departments.