CAPE TOWN

Outstanding municipal debt of about R26bn was reduced by about R1,4bn over the past six months by getting national government, mainly the public works department, to pay its arrears for municipal services rendered.

The provincial and local government department is also undertaking a pilot project to sell the private sector debt owed to about six municipalities to the private sector. Municipalities that are owed include Johannesburg, Erkhuleni and Nelson Mandela metropolitan council.

The department's deputy directorgeneral, Jackie Manche, said it was envisaged that about R10bn of debt would be sold to a private-sector company for it to collect.

The first phase, likely to last about six months, would involve an analysis of the data to determine what proportion of the debt could be sold.

Manche estimated that about 60% of the R26bn debt was owed by communities, 30% by the private sector and 6% by government. The department had given itself 18 months to deal with municipal debt. The most difficult debt to collect was that owed by communities for many of whom the services were unaffordable.

Municipalities around the country have been struggling for years to deal with the crippling problem of nonpayment for rates and services. At one point, municipal debt reached such high levels it was effectively a national crisis, with at least 100 municipalities facing serious cash flow problems.

Manche said the department would only be in a position to decide how much of the debt should be written off at the end of the project.

This week's meeting of the provincial and local government MECs with the Minister, also known as Minmec, included an overview of the achievements in the sphere of local government over the last five years. It noted the rise in municipal debt to about R26bn and the department's intervention strategy to assist municipalities recoup the money owed.

Provincial and Local Government Minister Sydney Mufamadi said after the meeting there were legitimate complaints about billing systems, which pointed to the need to enhance capacity to ensure improved administration of accounts.

The accumulation of the municipal debt has to some extent been attributed to the failure of municipalities to aggressively pursue the collection of funds and to submit monthly bills to consumers.

It is hoped the Municipal Finance Management Act, which was passed last year, will contribute to improved finances as municipalities will be obliged to issue accounts on a monthly basis. They will also be obliged to draw up monthly reports outlining the amounts owed.

The Minmec meeting noted that limited progress had been made in the area of intergovernmental relations and prioritised 2004 as the year in which the Intergovernmental Relations Bill and framework should be finalised.

Plans were also under way for municipalities to draw up anticorruption strategies by the end of the year. A strategy on the provision of free basic sanitation was being developed as well as national guidelines on an indigent policy by July.

A framework would also be drawn up for communities who used alternative sources of energy.