Cape Town battles with state debt

The City of Cape Town is owed R366-million by national and provincial authorities, but is not being paid because the two spheres of government cannot agree on who is responsible for the debt.

This has prompted city finance managers to approach the auditor-general for assistance. Several high-level meetings over the past nine months have not yielded a resolution.

Executive director of finance Mike Richardson told the Cape Argus the dispute had been going on for 18 months, and the amount owed increased every month.

"Each one says they don't owe money," he said.

The government has to pay rates and service charges like all property owners, and until July 2008 the national Department of Public Works was responsible for the payment of all accounts.

From that date, it was decided that payment of service charges would be devolved to provinces, Richardson said.

The city was not prepared to change the details of parties responsible for accounts until all arrears had been paid off.

"That's where the problem arose. Province did not have money at the time, and the longer it was left, the more complicated it got."

Richardson said the national government had paid everything it owed, but that money went to arrears service charges owed by the province.

Now the province believes it owes less than is being claimed, while the national government thinks its account is paid up.

Richardson said about 20 000 properties were involved, which represented "a large number of accounts to unravel".

To resolve the matter, the auditor-general had been asked for help but was reluctant because he was not supposed to mediate in transactions he might subsequently have to audit.

Richardson discussed the matter with the auditor-general yesterday and said if he was not prepared to help "the two parties must get someone else to sort out the mess for them".

remier Helen Zille got involved as long ago as last May, when she chaired a meeting in an attempt to resolve the issue. Of the money owed to the city, R293m is debt older than 60 days.

Meanwhile, a report before the finance portfolio committee showed that city employees owe millions in rates arrears.

The total debt outstanding at December 31 amounted to R13m. Arrangements had been made to pay off R7m of this amount.

Debt management actions and salary deductions continued to be instituted against staff who failed to come forward to pay or make adequate arrangements to pay off arrears, the city said.

No councillors were in arrears at the end of the year.

The total outstanding for rates and services owed to the city at the end of December was R4,5-billion, of which R3,3bn was for arrears.

Priority debt management actions were being pursued against the top 1 000 debtors, government, staff and bidders wanting to tender with the city.

"Debt management actions are being intensified, especially against those who can pay but choose not to pay," the city said.

Cape Argus

Posted at 09:39AM Feb 03, 2010 by Editor in Market  |