Massive Nelson Mandela Bay debt write- off

Metro faces financial crunch after it decides to ditch R500m in unpaid bills

Half a billion rand in unpaid rates and service bills will be written off by the Nelson Mandela Bay Municipality, as it grapples with the effects of poverty, unemployment and a sluggish economy.

The massive write-off covers a period of just three months – May, June and July – and will benefit the poorest of the poor, who cannot pay the electricity, water, sanitation and refuse charges, as well as those who applied for debt relief and nonprofit organisations.

And in another financial blow to the metro, about R81-million spent on building and rectifying houses may also have to be written off after Bhisho refused to pay because the documents needed to support the claims were never provided by the municipality.

A large chunk of the R470-million debt write-off – about R413-million – resulted from the metro’s new policy on the poor which came into effect at the beginning of July.

It is a lump-sum write-off for the 2016-17 financial year, which the municipality believes residents would not have been able to pay anyway.

The new policy saw 23 173 new names added to the list of the most destitute – people whose homes are worth R100 000 or less and thus automatically qualify for the metro’s Assistance to the Poor (ATTP) programme.

The total number of residents on the ATTP list is 111 000.

They do not pay property rates or for refuse removal, and receive eight kilolitres of water, 11 kilolitres of sanitation services and 75kW/h of electricity a month for free.

Last year, the municipality wrote off almost R600-million in debt.

Chief financial officer Trevor Harper said at a budget and treasury portfolio committee meeting on Tuesday that the write-off was money owed by the poorest of the poor.

The municipality has, meanwhile, decided to stop its debt-relief programme for struggling account holders whose gross monthly income is between R2 800 and R20 000.

Cash-strapped residents had previously been able to apply for debt relief if they could not pay their bills.

Their finances would then be assessed to establish if they qualified for discounts on their accounts.

However, the debt-relief programme has been discontinued since June because it did not help to convert slow payers into good payers.

Harper wrote in his report to the portfolio committee that the municipality’s budgeted revenue-collection rate had dropped in the last financial year from its target of 94% to 91.4%.

“This is not a good picture . . . and more effort will have to be put in to ensure that this situation improves drastically,” he wrote.

“The extent of [the] debts written off in the 2015-16 financial year is an area of concern as an amount of R594-million was written off.”

He said there was a recommendation that the revenue-collection target be reduced to about 93.6% as there appeared to be a downward trend.

“The situation may escalate as the council approved the new method of considering all properties valued at R100 000 to be categorised as indigent recipients,” Harper said in the report.

“The impact will be assessed from July 2016 going forward and be reported to council accordingly.”

EFF councillor Yoliswa Yako said the R470-million debt write-off was worr ying. She wanted to know if some of the money could be recovered from those residents who could afford to pay.

ANC councillor Rory Riordan said: “We have been writing off way too much money as a city.

“There’s R1-billion of debt that we are sitting on. “We need a regular update from EOH [the company hired to collect some of the money owed to the municipality] on what they are doing to collect the money."

“Probably, our municipal services are becoming too expensive. “I don’t think people are deliberately not paying.”

Riordan said there had to be a review of the metro’s entire ATTP programme.

“Something is catastrophically wrong. We need to review the system,” he said.

Economist Mike Schussler said the metro was not the first municipality to write off such a large amount of debt.

He said it was a symptom of the current economic climate and people struggling with debt.

“Over the last few quarters quite a few municipalities have written off money owed to them due to unpaid rates and municipal services,”Schussler said.

He said the city would have to investigate who was not paying, why they were not paying, and what could be done to either assist them with payments in the future or to collect the money owed from them.

Nelson Mandela Bay Ratepayers’ Association chairman Kobus Gerber said losing close to half a billion rand was a bitter pill to swallow.

However, he believed it was the right thing to do as many people were in dire financial straits.

“Getting this money would be like getting blood from a stone,” he said.

“The poor people do not have the money, so going after them will do no one any good.”

Gerber said it would not be logical to spend more money on administrative and legal fees to try to collect money from people who simply could not pay.

Meanwhile, Bhisho’s refusal to reimburse the metro for the R81-million spent on building and rectifying houses is based on the fact that repairs to some of the houses had not been done within the original scope of the project.

The metro’s housing revolving fund, which is set at a limit of R100-million, is used to pay contractors while the municipality waits for payment from the provincial government.

However, the municipality has struggled for years to get the fund down to R100-million or less.

By the end of July, the revolving fund was sitting at R180-million.

The councillors at Tuesday’s portfolio committee meeting said it was unacceptable that R81-million might have to be written off due to mismanagement.

Committee chairman Retief Odendaal said the revolving-fund debacle was the result of gross mismanagement.

“Contractors were allowed to build houses that did not meet the quality standards,” he said.