South Africa’s richest city in deep trouble

The City of Johannesburg is owed nearly R60 billion by organs of state, commercial customers, and households, which contributes to its inability to pay its growing debt to Eskom and water boards.

This not only affects service delivery in the city but also negatively impacts Eskom and, consequently, taxpayers if the utility needs another government bailout.

In response to a recent Parliamentary question from DA MP Anna Maria Van Zyl, Cooperative Governance and Traditional Affairs Minister Velenkosini Hlabisa provided insight into Joburg’s growing debtor’s book.

The minister revealed that the City of Johannesburg is owed R2 billion from organs of state, R9.5 billion from commercial customers and R48.8 billion from households. This totals R59.9 billion.

Hlabisa said it is particularly concerning that R42.8 billion of this total debt has been owed for over a year.

The minister said this significant debt burden is the main reason for the City of Johannesburg and other municipalities’ inability to pay their debts to Eskom and the country’s water boards.

“Our analysis of the latest Section 71reports points to the non-payment of services provided by the municipalities to the residents as the primary contributor to the growing debt to Eskom and water boards,” he said.

“The inability of the municipalities to collect ultimately results in insufficient cash flows to settle the amounts due to creditors, including Eskom and Water Boards.” 

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.

Municipalities’ inability to repay their debt to Eskom prompted the National Treasury to introduce the municipal debt relief programme in March 2023.

The initiative aimed to support struggling municipalities by writing off their debt to Eskom in equal tranches over three years, provided the municipalities met certain conditions.

These conditions were centred around promoting financial stability in the programme’s participants to avoid municipal debt to Eskom spiralling out of control in the future.

However, in the 2025 Budget, the National Treasury revealed that many of the 71 municipalities in the municipal debt-relief program failed to meet the required conditions.

It said key issues include persistent non-payment of monthly electricity accounts and an inability to collect the mandated 85% of revenue.

The Treasury explained that 47 municipalities have consistently defaulted and already accumulated substantial arrears after receiving debt relief.

South Africa’s metros are in trouble

South Africa’s Auditor-General (AG), Tsakani Maluleke, has also previously warned about the risk that non-collection of payments presents to the country’s metropolitan municipalities.

In the AG’s Integrated Annual Report for the 2023/24 fiscal year, Maluleke stated that the country’s metros are plagued by poor revenue management, debt collection, and budgeting practices, as well as financial losses resulting from poor-quality spending.

“Metros typically have better capacity and bigger budgets and can more easily attract suitably skilled and competent professionals,” she said. 

“Therefore, their audit outcomes are expected to be better, and they should be setting an example to other municipalities. However, the overall audit outcomes of metros have continued to regress since 2020/21.”

The AG further warned that the mismanagement of South Africa’s metros can have devastating consequences for the households they serve.

“When municipalities do not effectively manage their performance, finances and infrastructure, it directly affects the delivery of key government priorities that are intended to improve the lives of South Africans,” she said. 

“Services and infrastructure in the basic areas of water, sanitation, waste management, electricity, housing and roads are not consistently and sustainably delivered, despite the budgeted funds being spent.”

This impact can already be seen in the City of Johannesburg, whose residents regularly experience bouts of time without a consistent water and electricity supply.

This is due to several reasons, including a growing population, ageing and poorly maintained infrastructure, and instability within the city’s leadership.

However, the city’s financial mismanagement is one of the top concerns, as Joburg’s inability to repay its debts and collect sufficient revenue prevents it from effectively addressing its other problems.