TSHWANE NOT WINNING THE WAR AGAINST BAD CONSUMER DEBT With 60% of the total R 5,8 billion - outstanding consumer debts for the City, for period ended 30 June 2013, - handed over for collection, it is evident that Tshwane is battling a monster that is threatening to cripple the City financially. Accounts older than 120 days pose the biggest challenge and have a total outstanding balance of R 3,4 billion for the financial year 2012/13. Tshwane makes use of ten active collection agencies to collect outstanding debt and to secure arrangement plans where consumers can only afford to make limited payments per month on arrears. DA Spokesperson for Finance, Councillor Adriana Randal, said that municipal governments that turn to private debt collection agencies often pay high fees that limit the amount of net revenue collected. Aggressive debt collection efforts may also represent an ineffective approach to maximizing city revenues. Collection costs for the financial year amounted to R 96 million vs. the R 734 million collected by the ten collection agencies. A further R 964 million was written off as bad debts for the same period, indicating a R 124 million negative variance from the actual budget of R 840 million. “Normally, when families cannot pay their service accounts, it is often a sign that they are in deep financial distress, that is to say that the accounts are accurate and sent on time for residents to be able to pay,” said Randall. Arrangement plans made during the 2012/13 financial year amounted to R 188 million. This is money that will potentially be recovered but with this comes an enormous administrative burden. The DA will be requesting the chairperson of the MPAC – Public Accounts section 79 standing committee to make available the financial expenses incurred for the payment of these agencies, in order to establish if chasing old debt is financially sustainable for the City. “If due credit control processes were followed and services restricted or cut after 30 days, without fear or favour, then the accumulation of outstanding debtors balances might have looked different from where they are now” said Randal.
Posted on: Tue, 01 Oct 2013 09:06:05 +0000
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