Municipalities were owed an aggregate of R347.6bn by consumers at end-March, the end of the third quarter of the local government financial year. This is R9.4bn higher than the R338.2bn reported in the second quarter of 2023/24.
According to a statement by the National Treasury on Wednesday on the revenue and expenditure of local government for the period July 1 2023 to end-March 2024, a total amount of R8.3bn, or 2.4%, has been written off as bad debt.
“The largest component of this debt relates to households and represents 73%, or R253.6bn,” the Treasury said. At the end of the second quarter households owed R245.8bn or 72.7% of the debt.
For their part, municipalities owed R106.7bn, an increase of R2.4bn compared to the R104.3bn reported in the second quarter of 2023/24. Municipalities owed Eskom R75bn at the end of February for electricity supply, a debt that continues to rise exponentially each year. Local government also owes water boards billions of rand.
“Of concern is outstanding creditors of more than 30 days relating to bulk electricity and water, trade creditors and other creditors,” the Treasury said.
“The analysis of the collection rates indicates that while municipalities on average have an adjustments budget of 83% collection rate, aggregated actual collection performance against billed is an under achievement of 61.5%. The underperformance of actual collections against billed revenue holds a significant risk for the liquidity position of most municipalities as the planned expenditure is based on a higher performance level.”
“Of concern is outstanding creditors of more than 30 days relating to bulk electricity and water, trade creditors and other creditors.
The financial situation of municipalities is not assisted by the fact that organs of state owed them R22bn at end-December 2023. National departments owed R8bn, provincial departments R9.8bn and other state entities and institutions R4.3bn.
By end-March municipalities had spent an aggregate of 66.3%, or R411.4bn, of the total adjusted expenditure budget of R620.7bn. Aggregated billing and other revenue was 73.4%, or R452.8bn, of the total adjusted revenue budget of R616.6bn.
Capital expenditure was R38.1bn, or 48.3%, of the adjusted capital budget of R79bn.
The adjusted operating expenditure budget was R541.7bn of which R373.3bn, or 68.9%, was spent by end-March.
Municipalities adjusted their budget for salaries and wages (including the remuneration of councillors) from R154.5bn to R153.5bn a decrease of R1bn or a 0.7% decrease from the adopted budget of R154.5bn for the 2023/24 municipal financial year.
The budget for salaries and wages constitutes 28.3% of the total adjusted operating expenditure budget of R541.7bn. At end-March R108.5bn, or 70.7%, of the adjusted salary budget was spent.
The Treasury expressed concern about the low level of spending of the infrastructure conditional grant.
Of the R39.6bn allocated as direct infrastructure grants, 59.4%, or R23.6bn, was reported as expenditure as at end-March.
“Low expenditure on infrastructure grants is a source of concern because this slow performance may eventually lead to unspent conditional grants that have to revert to the National Revenue Fund (NRF). The surrendering of unspent conditional grants to the NRF has negative consequences to the communities that must receive the services linked to the infrastructure to be built,” the Treasury said.
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