Government departments owe municipalities R22 billion

Government departments owe municipalities R22 billion in outstanding payments. National departments owe R8 billion, provincial departments R9.8 billion, and other state entities R4.3 billion. 

Finance Minister Enoch Godongwana revealed this in a written reply to a parliamentary question this week. 

The figures given by Godongwana are the amounts owed by state entities as of the end of December 2023. 

Government entities often accrue debt from unpaid bills, with nearly R1 billion of invoices unpaid in 180 days. 

The worst culprit among national departments is the Department of Public Works, which owes municipalities R3.4 billion. 

The breakdown of invoices unpaid by national departments is as follows –

• R1.6 billion unpaid within 30 days
• R731 million unpaid within 60 days
• R782 million unpaid within 90 days
• R695 million unpaid within 120 days
• R650 million unpaid within 150 days
• R961 million unpaid within 180 days

Suppliers of the government often complain about late payments, which impact their ability to run their businesses as there are no reliable payments from state entities. 

Godongwana encouraged municipalities to enforce their credit control, debt management policies, and bylaws to claim unpaid amounts from state entities. 

He added that existing legislation, such as the Public Finance Management Act and Municipal Finance Management Act, allows municipalities to terminate services to government entities if their bills are not settled within 30 days. 

“Even if the customer questions the accuracy of the bill issued by municipalities, which may be a valid concern, it is not acceptable not to honour the payment for services consumed,” he wrote. 

Municipalities in a ‘fight for survival’ 

National Rationalised Specifications Association of South Africa chairman Vally Padayachee previously said South African municipalities are severely cash-strapped and in a “fight for survival”.

Padayachee said municipalities consume about 45% to 47% of Eskom’s electricity, making it a large chunk of a municipality’s sales cost.

Municipalities buy electricity from Eskom and sell it to the citizens in their jurisdictions.

“This means load-shedding from 2008, which has gotten worse and worse, has had a significant impact on the municipalities’ business,” Padayachee explained. 

“Like Eskom, if the municipalities don’t sell electricity, they don’t execute on the constitutional mandate of service delivery.” 

“More importantly, they cannot collect much-needed revenues for their survival and to service their customers. So much so that municipalities are virtually a reseller of Eskom.”

He said the constant and erratic stages of load-shedding have exacerbated this problem. 

He explained that load-shedding means the municipalities do not have electricity at peak times, when they make money on the surplus they sell.

Padayachee added that most municipalities in South Africa, including some of the major metros, are significantly cash-trapped at the moment. 

“Municipalities, the majority of them, are significantly cash-strapped – fighting for survival,” he said.

For the majority of municipalities, between 75% to 90% of their income now goes towards purchasing electricity from Eskom, given the utility’s high cost of sales.

This means these municipalities only have around 25% to 10% of their operating budget left to run the municipality, making it virtually impossible to run effectively.