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FINANCE: Cellphone Solution for Massive R43bn Municipal Debt


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… Johannesburg spent zero on repairs and maintenance for the second quarter of 2009 - Treasury

Municipalities are on average collecting less than half the revenue owed to them with R31.3bn owed to cities and R11,5bn owed to towns according to stats released by the National Treasury.

The Treasury said the city debt was an increase of R1.6 billion or 5.3 percent from the same period in 2008. The biggest increases at the end of 2009 compared to the same quarter in 2008 were in Cape Town at 24.6 percent or R966 million, eThekwini at 22.3 percent or R877million and Ekurhuleni Metro at 16.8 percent or R1.1 billion.

Consumer debts owing to secondary cities (towns) amounted to R11.5 billion as at 31 December 2009 and have increased by 12.8 per cent or R1.3 billion from 2008.

“This is a very serious situation,” David Reynders, managing director of cellphone payment provider Pocit said, “the less money municipalities collect, the less able they are to fix potholes, improve roads, provide water, clear drains and the essential services consumers expect.

“And the more services municipalities provide, the more jobs they create.

“It is critical that municipalities increase the payment options for consumers. Failures in revenue collection are not always because consumers do not want to pay but because they lack access to the internet, post offices or other payment outlets or cannot afford time off from work – especially with today’s high rate of job loss – to stand in queues to pay bills.

“More than 85% of adult South Africans have a cellphone and most cellphones have web applications which allow consumers to pay municipal bills by cellphone through Pocit, 24 hours a day, seven days a week without having to take time off work, spend time in queues or travel long distances and pay for transport.”

Reynders said that Pocit had created a system where residents of Cape Town, Johannesburg, Tshwane and eThekwini could pay their municipal bills by cellphone. In April it will introduce the capacity for Cape Town residents to buy prepaid electricity by cellphone.

“It is a very easy process, for those with credit cards or cheque cards verification and payment can be immediate once they register on For those with savings accounts there can be a once-off delay for verification of their details of around four days, and this is a simple security precaution, but after that, payment takes around two to three minutes once they have entered their municipal account number and the amount they want to pay. The money reflects 24 to 48 hours later in the municipality’s account.

“In addition, the payment record is stored on their cellphone in the event of queries.”

Reynders said although payments to municipalities by cellphone were increasing, municipalities were not always advising consumers of this new payment method. “We believe that if they did, they would see an increase in revenue collection by giving consumers this more convenient payment option.”

The Treasury figures give an indication of very low spending on maintenance. “Metros spend on average 2.8 percent of their total budgets on repairs and maintenance. Ekurhuleni Metro spent 5.1 percent or R700 million of a budget of R13.6 billion while City of Johannesburg reported zero spending on Repairs and Maintenance for the second quarter. These numbers are probably distorted by under-reporting of repairs and maintenance due to classification discrepancies when municipalities capture these expenditures. While the new budget formats begin to deal with this problem, it will only be fully resolved once there is a uniform Municipal Standard Chart of Accounts in place.”

The Treasury said that “consumer debtors over 90 days constitute a very large proportion, comprising R8.7 billion or 76 percent of the total amount outstanding.”

And while revenue collection was low, so was service delivery: “At 31 December 2009 municipalities had spent 46.6 percent or R90.8 billion of the R194.7 billion total adopted budget. On the revenue side they have collected in aggregate 49.0 percent or R102.9 billion of the R210.1 billion total adopted revenue budget.

Nine metropolitan municipalities had collected 46.5 per cent of their revenue at the end of the second quarter or R59.9 billion of the adopted revenue budget of R128.9 billion. The City of Johannesburg collected the highest proportion of its revenue at 52.5 per cent, with Ekurhuleni Metro following at 48.4 per cent.

The Treasury said, “The spending analysis for the second quarter indicates that the 2010 World Cup Stadiums Development Grant remains the best performing programme in both the previous and the current financial year with expenditure of 84 per cent for this second quarter, followed by Public Transport Infrastructure and Systems Grant and Water Services Operating and Transfer Subsidy Grant with expenditure of 66.9 and 63.9 per cent respectively.”

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