Important South African city collapsing with mounting debt and service delivery problems

Despite participating in the government’s municipal debt relief programme, the City of Mbombela’s financial position continues to deteriorate.

This significantly affects service delivery in the municipality, with some hospitals experiencing regular power cuts.

Finance Minister Enoch Godongwana lamented the City of Mbombela’s financial difficulties in response to a recent Parliamentary question from ANC MP Vusumuzi Nkosi.

Nkosi asked the minister whether, considering the City of Mbombela’s participation in the government’s debt relief programme, National Treasury could assist the municipality in eradicating its debt to Eskom.

This came in light of power cuts at hospitals such as the Barberton Provincial Hospital and Rob Ferreira Hospital in Mpumalanga, which Nkosi said have raised serious concerns about patient care.

Nkosi said these power outages have been linked to unpaid municipal bills of R5 billion.

The National Treasury introduced its municipal debt relief programme in March 2023 to support struggling municipalities by writing off their debt to Eskom in equal tranches over a three-year period.

Over the past few years, municipal debt owed to Eskom has spiralled out of control. It rose from R74.4 billion at the end of March 2024 to R94.8 billion at the end of December 2024.

This significantly strains Eskom’s finances and operations and is one of the biggest threats to the power utility’s sustainability.

In his response to Nkosi’s question, Godongwana explained that the ring-fencing of municipal relief debt, if coupled with a return to basic minimum financial management, should bring relief to the municipal Eskom defaulters.

He said the programme has the added benefit of staggered debt write-offs over the three years, subject to the municipality meeting certain conditions.

Therefore, the success of the debt relief programme is ultimately up to the municipalities, not the National Treasury, as is evident in the City of Mbombela.

“Political leadership at the municipality ultimately sets the tone for cost-reflective tariffs; completeness of the revenue base; and enforcement of credit control,” he said.

City in trouble

Godongwana said the debt relief provided by the Treasury’s programme has proven futile in municipalities where the political leadership does not enforce basic financial management and collection.

This is either due to a lack of financial understanding or fear of a change in their consumer constituents or other reasons.

The minister said this lack of willingness to enforce collection or better financial management becomes evident in the dismal collection efforts of most of the debt relief programme’s persistent defaulters.

Despite participating in the municipal debt relief programme, as of 7 May 2025, the City of Mbombela accumulated an additional R1.05 billion debt with Eskom since 1 April 2023. This is in addition to the city’s R1.07 billion municipal relief debt as of 31 March 2025.

Godongwana explained that the municipality is not enforcing credit control. As of 31 March 2025, the municipality’s total outstanding debtors amounted to R1.28 billion, of which 80% were more than 90 days old.

The organs of state owe the municipality R253.6 million, or 20% of the R1.28 billion as of 31 March 2025. 

Specifically, the City of Mbombela confirmed that as of 27 May 2025, the Department of Health owes it R6.5 million for the Baberton Provincial Hospital, R20 million for the Rob Ferreira Hospital and R11 million for the Themba Hospital, a total of R31.65 million. 

“In addition, the municipality persists in not billing a component of consumers in its townships due to political resistance,” Godongwana said. 

This means the municipality supplies unlimited services, such as water and electricity, to these areas. It also does not collect property taxes in these areas because the administration is prevented from measuring consumption and billing this component of consumers. 

“These factors, in combination with the council failing to implement tariffs that are not cost-reflective and incompleteness in the rates base that is not addressed, culminate in the municipality being unable to pay Eskom, bulk water and other creditors,” the minister explained. 

“In this context, it is noted that Municipal Debt Relief did not achieve the intended outcome in the City of Mbombela.”

In his 2025 Budget, Godongwana warned that as many as 47 municipalities, including the City of Mbombela, could be terminated from the government’s debt relief programme due to outstanding debt owed to Eskom.

“The National Treasury is determining the next best option to assist with the Eskom payments and the sustainability of the municipality,” Godongwana said.

“It is important that the municipality endeavour to institute credit control and collect what is due to it by consumers.”