Alarming R2bn rise in debt owed to KZN municipalities
Ratepayers in KwaZulu-Natal are struggling to pay their accounts, with their debt to municipalities having increased by more than R2 billion in just three months.
At the same time, the municipalities also owe rising debt to service providers. This situation arises against the backdrop of the recently finalised fourth quarter review of the 2024/2025 Consolidated Municipal Budgets Performance Report.
KwaZulu-Natal Finance MEC Francois Rodgers is concerned about the deepening debt crisis. He is further alarmed by the fact that the situation is worsened by financial mismanagement within municipalities.
The MEC has found the persistent failure to comply with financial management prescriptions in municipalities to be so dire that he is considering writing to the national Treasury to request a halt to financial transfers to some municipalities. At least 20 municipalities in the province have been flagged for financial management concerns. The number increased by four between the third and fourth quarters of the 2024/2025 financial year.
In a statement, Rodgers said: “Municipalities are the closest sphere of government to citizens. They are key to service delivery. Failure to comply with financial management prescripts does not bode well for the agenda of developing an ethical and capable state.”
In the third quarter, debt owed to municipalities in KZN stood at R64.3bn. This increased to R67.1bn in the fourth quarter, marking a R2.8bn increase, which the MEC said is unsustainable. “It is alarming that R56.6bn of the total figure owed to municipalities is debt exceeding 90 days,” highlighted Rodgers.
Over the same period, he said, the money owed by municipalities increased from R7.4bn to R9.3bn – an increase of 25.5%, which is also worrisome. Rodgers also noted with concern that R6bn, or 64.3%, of the debt owed by municipalities was outstanding for more than 30 days, in contravention of Section 65(2)(e) of the Municipal Finance Management Act (MFMA).
Furthermore, the number of municipalities with one or more serious financial management challenges increased from 17 in the third quarter to 20 in the fourth quarter.
The department said that in a recent letter to Rodgers, Finance Minister Enoch Godongwana indicated his willingness to invoke section 216(2) of the Constitution and stop all financial transfers to municipalities who have failed to implement unauthorised, irregular, fruitless, and wasteful expenditure prevention and reduction strategies by 31 August.
The department said Rodgers was strongly considering making a recommendation for Section 216(2) to be invoked against some municipalities in the province for their persistent failure to comply with financial management prescripts.
“Serious financial problems in terms of Sections 138 and 140 of the MFMA include failure to comply with Supply Chain Management (SCM), debt collection, and credit management prescripts. The KZN Treasury provides technical guidance and support to municipalities in the implementation of their SCM policies as well as standard operating procedures.
“Consequence Management and Accountability (CMA) is intended to support corrective action in respect of transgressions of the laws or rules applicable to municipalities and municipal entities. Municipal councils must display strong leadership in implementing CMA. We urge municipalities to demonstrate a keenness to deal with errant officials as part of efforts to improve service delivery,” Rodgers said in the statement.
Chairperson of the Co-operative Governance Portfolio Committee in KZN, Marlaine Nair, said the issue of debt was very serious. “The collection rate of municipalities and their payment to creditors is below expectations. People are not paying, but a lot of debt is from the government departmentS. The liquidity of municipalities is a serious issue for us, and we have said they should make concessions and offer discounts in order to collect some of the debt.”
Lourens De Klerk, IFP MPL and member of the finance committee, speaking on the possible freezing of grants, said, “If the municipality proves over and over again that they do not have the financial control in place, you have to do something to protect the integrity of the municipalities themselves. Local government is at the centre of service delivery yet it is also the most troubled of the government spheres.”