The Mother City’s borrowing binge is now teetering around the R6.6-billion mark, a financial predicament that remains lower than most of its state-wide peers as it balances its debt as well as growing arrears accounts from consumers and the government.
The City’s Mayco member for Finance, Siseko Mbandezi said “R6.6bn is our current debt … the bulk of it consists of bonds,” adding that this is the balance as of June 30.
As much as R4.8bn, according to Mbandezi, is made up of municipal bonds and R1.7bn for direct loans from the French Development Agency (FDA) and the KfW development bank.
Over the same period last year, the City’s borrowing total stood just below R7bn.
When it comes to debt due to the City, Cape Town residents and businesses owe it R7.5bn in rates and services, whereas government entities owe the City R97 million.
The City said it’s payment ratio hovered around the 97% mark, indicating that most ratepayers can pay their municipal accounts. This paved the way for the ratings agency Moody’s to retain the City of Cape Town’s outlook as stable.
According to Moody’s rating report, the rating outlook reflects the City’s “moderate financial performance, supported by prudent financial management and a large and diversified economic base”.
The City, according to the report, has “consistently” reported “robust” operating surpluses and strong liquidity.
The Metro said those who are struggling to pay their accounts should approach the City for assistance. More than 40% of Cape Town’s residents currently benefit from some level of financial rates and service relief.
“It is important that municipal income is protected,“ said Mbandezi.
“Without it, the City will not be able to provide basic and essential services. Anyone struggling to pay is encouraged to approach the City and discuss their circumstances with us … Quite often we see situations where people are struggling to pay their municipal account, but instead of approaching the City so that their particular circumstances can be looked into and a formal arrangement can be made (they kept quiet).”
This week, Treasury announced that government institutions had paid 40% of its debt owed to metros over the last three months.
“Aggregate municipal consumer debts amounted to R290bn (compared to R264.7bn reported in the first quarter of 2021/22) as of 30 September,” read a statement by Treasury.
“Government debt accounts for 8%, or R23.3bn (R19.6bn reported in the first quarter of 2021/22). The largest component of this debt relates to households, which account for 70% or R202.4bn.”
Treasury said, had consumer debt been limited to below 90 days, then municipalities would realistically be able to have R48.8bn of collectable debt on its book.
“This should not be interpreted that the National Treasury by implication suggests that the balance must be written off by municipalities,” warned Treasury.
The country’s metros were owed R147.5bn, with the City of Joburg accounting for a majority of that figure with R43.9bn, Ekurhuleni coming in second with R27.8bn, eThekwini with R21.7bn and Tshwane at R17.7bn.
The report also highlighted the fact that municipalities owed their creditors R86.2bn by September 30 with Free State, Mpumalanga, Northern Cape and North West flagged for having the highest percentage of outstanding debt to creditors.
“An increase in outstanding creditors could be an indication that municipalities are experiencing liquidity and cash challenges and consequently are delaying the settlements of outstanding debt owed.”
Earlier this year, Finance Minister Enoch Godongwana said more than 150 of the 257 municipalities nationally were bankrupt or insolvent.
“Municipalities are living beyond their means … they milk ratepayers, inflate staff bonuses and do everything but the necessary, i.e. pay their Eskom debt. I'm not saying all municipalities are bad, but the majority of them are," said economist Ulrich Joubert.
Weekend Argus