By Anish Abraham
In an attempt to collect all the cash owed to it, Joburg aims to set up a new company dedicated to recovering its bad debts. The public has been asked to comment on the plans.
Joburg has issued a notice signalling its intention to create a municipal-owned entity that will restructure its Debtors' Book and facilitate an accelerated debt collection process.
The Local Authority Notice has been issued in compliance with the Municipal Finance Management Act and the Municipal Systems Act. The company is being established as a Special Purpose Vehicle to restructure the Debtors' Book, separating it from the rest of the City's finances. In this way, bad debts will be ring-fenced and the company will be responsible for recovering the outstanding amounts.
"We have a non-performing asset in our Debtors' Book and we are exploring what we can [do] to liquidate such an asset into cash, improving our balance sheet," explained Jason Ngobeni, the City Treasurer.
Such a move would free up funds that the City could use for its capital expenditure needs. According to Ngobeni, the concept came about through investigations into debt owed to municipalities by the national Department of Provincial and Local Government.
"It is not mandatory; rather it is prudent financial compliance. We want to have an optimum balance sheet comprised of good quality assets and liabilities."
In the process, the City will make a separation between its residents with, on the one hand, those it feels are in a position to pay their debts but fail to do so, and on the other those who are unable to pay their debts.
The City will consider whether the latter may benefit from either phase of its Municipal Services Subsidy Scheme. In the scheme's first phase, the City wrote off the arrears of indigent residents; in the second phase, known as Reathusa, low-income earners are required to pay off half their debt, with the City writing off the other half.
The new company will then go about recovering debts from those debtors the City feels are able to pay but who are not doing so.
"Last year the City was owed a gross amount of over R7-billion," Ngobeni said. "However, this amount includes those who will benefit from our indigent schemes and other subsidies. We are still busy separating the debts and calculating the exact amount owed."
Ngobeni said that in compliance with the Municipal Structures Act, the City would seek comment from the public on its plans, until 4 November. The motion will then be put forward at the general council at the end of November.
Members of the public can comment on the City's plans to restructure its Debtors' Book by phone on (011) 242 1042/9; by fax on (011) 242 1055/6; or by email at agentm@joburg.org.za or helenbotes@joburg.org.za.
Comments can also be sent to Helen Botes or Mohau Motake at:
Treasury Department
14th Floor
Jorissen Place
66 Jorissen Street
Braamfontein
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