Municipalities face financial challenges while government is not paying them their due, Finance Minister Godongwana said.
Finance Minister Enoch Godongwana has urged government departments to pay their debt to municipalities.
Providing his Medium-Term Budget Policy Statement (MTBPS) on Wednesday, Godongwana outlined that government debt “has risen too fast and is too high”.
He said debt is now unsustainable because debt-service costs have become the “largest component of our spending” and rises faster than economic growth.
He predicted debt-service costs will reach R388.9 billion in the current financial year.
“Put differently, this means for every R1 of revenue that government raises this year,
22c of this is paid in debt-service costs,” he said.
ALSO READ: These are the 5 worst municipalities currently under administration
Godongwana tells departments to act now
While outlining steps taken to reduce the budget deficit, Godongwana said government achieved a primary budget surplus in 2023/24.
Still, he said debt needed to be addressed by those causing it.
50 of the country’s 257 municipalities are undergoing financial recovery plans because of serious governance, planning and financial management challenges.
“We implore provincial and national departments owing municipalities to pay their dues,” he said.
“Since February when we last reported on the [Eskom municipal debt relief programme], around 70 of the municipalities that had applied for debt relief have been approved.
ALSO READ: Eskom owed R81.6 billion by municipalities: Who owes the most?
Godongwana says municipalities will see debt written off if compliant
“Between March and August 2024, compliance with relief conditions by municipalities improved from 55% to 76%, aided by the National Treasury, Provincial Treasuries, and the Municipal Finance Improvement Programme.”
The minister said Rand West City is the first municipality to benefit from a one-third debt write-off.
This follows its “substantial achievement” of the debt-relief conditions for the first 12-month cycle.
“More municipalities stand to benefit from this write-off of debt if they comply with the conditions of the programme.
“We implore provincial and national departments owing municipalities to pay their dues. This will enable municipalities to pay waterboards and Eskom, so that utilities can deliver these services to citizens.”
ALSO READ: MTBPS: 10 issues to look out for
