Mangaung Metro Debt Collection fails to meet standards, urgent action needed

Issued by Hardie Viviers – DA Councillor Mangaung Metropolitan Municipality
25 May 2023 in Press Statements

Note to editors: Please find attached English and Afrikaans soundbites by Cllr Hardie Viviers and Sesotho by Cllr Thomas Ferreira.

The Democratic Alliance (DA) is deeply troubled by the significant shortcomings in debt collection practices within the Mangaung Metropolitan Municipality (MMM), as highlighted in the recent Consolidated Annual Report by the Auditor General (AG) covering the period until the end of June 2022. The report reveals distressing findings that demand immediate attention and intervention.

One of the key findings in the AG’s report is the termination of the services provided by the two companies appointed to assist the Municipality with debt collection from businesses that have failed to meet their financial obligations. This development, coupled with other factors, has led to a net loss of R872,688,325 for the group during the financial year ending 30 June 2022. Furthermore, the report indicates that the group’s current liabilities now exceed its total assets by R485,444,061. These distressing circumstances raise serious doubts about the MMM’s ability to continue as a going concern.

To exacerbate matters, the current state of debtors within the MMM paints a bleak picture. The outstanding debt has seen a worrying growth of R457,000,000 within just three months, reaching a staggering total of R9.705 billion as of March 2023. This ineffective debt collection is evident across different sectors, including domestic, business, and government debt.

Despite the Credit Control and Debt Collection Policy providing clear guidelines for the handover of accounts to debt collectors after they are more than 90 days overdue, it appears that the MMM falls short in enforcing this procedure. While they may engage in what is referred to as “soft” debt collection as described in the policy, they fail to address the critical handover of debt for formal litigation processes, as outlined in bullet 22(2) of the policy.

This failure to prioritise and effectively execute debt collection activities within the MMM perpetuates the annual growth of debt by staggering amounts, far exceeding half a billion Rand within a mere three-month period. Budgets approved by the Municipality that rely on the collection of outstanding debt are left unfunded, resulting in a cycle of adjustment budgets. MMM’s inflated budget expectations, based on the belief that outstanding debt will be collected, further exacerbate the financial strain.

The DA is committed to holding the ANC-led Municipality accountable for its debt collection responsibilities. We will raise pressing questions and initiate debates during the approval process of the 2023/24 budget to address this critical issue. Furthermore, we have submitted written questions to the Provincial Legislature, demanding transparency and urgent action to rectify the inadequacies in debt collection practices within the MMM.