Debt management framework for Western Cape Province municipalities

Abstract

From a municipal perspective non-payment means that consumers, rate-payers and citizens are not fulfilling their obligations towards a particular municipality, contributing to a situation of insufficient available cash for day-to-day service delivery. The current debt situation in municipalities can be linked to the creation of a culture of non-payment due to the political situation in South Africa pre- and post-1994. Sections 1.1, 1.2 and 1.3 present the contributions and reasons for the current debt situation per the three spheres of government. South African municipal debt increased by 88 percent (R44 billion) over the last five financial years, from R50 billion in 2009/2010 to R94 billion in 2013/2014. The trend of 15- 20 percent per year increase in debt precludes the effective, efficient and economic provision of essential and emergency services to communities. All municipalities need to ensure that an effective collection relationship exists and that municipalities implement policies, by-laws, processes, procedures and systems in this regard. However, many municipalities fail in their quest for effective collection, or lack the capacity to utilise enabling legislation to implement an efficient and effective debt collection framework. This research study was conducted in response to this scenario, to identify and document existing problems through the development of guidelines and a framework for effective cash and debt collection. The guidelines will assist municipalities in collecting their outstanding debts.