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The Ts & Cs of Joburg's consumer debt write-off

South Africa

City Finances

The Ts & Cs of Joburg’s consumer debt write-off

epa00842745 The Johannesburg, South Africa, skyline is dominated by the Hillbrow Tower, Friday 13 October 2006, at 270 metres or 90 stories. Some 200 000 people live in the inner city, of whom only 44 percent are employed. The city is 120 years old this year, having been rebuilt four times; first it was a tented camp, then a town of tin shanties, then of four-storey Edwardian brick buildings. Today it is a city of modern skyscrapers, and with modern sports stadiums is one of the host cities in South Africa for the 2010 FIFA World Cup. EPA/JON HRUSA

The City of Johannesburg is offering a 50% debt write-off on qualifying residents' municipal accounts in an attempt to build long-term compliance. The catch? You have to pay your rates and services going forward.

The City of Johannesburg could write off as much as R6-billion in consumer debt in a new programme that seeks to ensure residents pay their rates and services in the long-term by offering to scrap their debt over three years.

To mitigate the city’s increasing levels of debt, the Debt Rehabilitation Programme was passed in council on Thursday to change the behaviour of residents who haven’t been paying their bills.

Qualifying customers will receive an immediate 50% write-off on their arrears. If they comply with the conditions of the programme, the remaining 50% will be written off over three years.

To qualify, customers must: be a residential rather than business account holder; have a balance in arrears for more than 90 days; have a monthly household income between R4,750 and R22,000; and the property’s market value cannot exceed R600,000.

Johannesburg Finance MMC Funzela Ngobeni said the city has a total debt book of R24-billion. “It keeps on increasing with economic conditions within the country so it’s a big problem for us,” he said.

Around 70% of the money owed to the city relates to outstanding rates and taxes, both from business and residential accounts.

Ngobeni said if every qualifying customer signed up for the debt rehabilitation programme the city would write off around R6-billion over three years. The city writes off some outstanding debt every year.

This time we’re not just writing off. We’re sort of going into a deal with the customer and ensuring that going forward they can pay what they consume,” said Ngobeni.

The will target areas such as Westbury, Annandale, Diepsloot and Alexandra where customers have a long history of arrears and have protested when the city tries to take action.

The new policy is an attempt at overcoming that stalemate. If customers sign up, they must agree to certain conditions such as having pre-paid meters installed, regular inspections of their meters, and paying their future bills. If they break the agreement, the debt is reimposed.

Asked about residents who might want their debts scrapped without conditions, Ngobeni’s message was: “Please come forward. We understand that the debt has been there for a long time but we as the city will work with you.”

The DA, its coalition partners and the ANC voted for the programme in Council but the EFF voted against it.

We think it’s an important thing to do given the economic conditions that are prevalent in the country where many people are unemployed and are unable to pay the municipal services. But as you know there are qualifying criteria that you have to have,” said ANC Johannesburg spokesperson Jolidee Matongo.

It’s not like it can go on forever and ever and not pay and then you get to three years later. We would like to encourage people to take the opportunity to approach the city to make sure that they qualify,” he continued.

Residents can apply for the programme in September after the city promotes awareness in August. Applications will be open for the financial year after which Council will review its success. Both Ngobeni and Matongo encouraged low-income households to apply for the expanded social package that limits the cost of services they pay.

EFF Council leader Musa Novela did not respond to requests for comment on Friday.

Municipal IQ economist Karen Heese called the programme “excellent”. She said it acknowledges economic pressures faced by residents, focuses on collecting debt otherwise considered unrecoverable, and encourages compliance and legality.

Johannesburg has more consumer debt than any other municipality in SA,” said Heese.

It will necessarily be an expensive exercise, and won’t necessarily be an option for other municipalities, but properly managed, and with a good response, the benefits should outweigh the costs,” she added.

While the city faces a crisis of non-paying residents, it has its own challenge in managing the so-called “billing crisis”.

We want to see all the customers receiving the correct bills every month,” said Ngobeni.

He said customer queries have dropped from around 100,000 a month a few years ago to around 9,000 per month currently. The city is working on an automated billing system and improving its customer care centres.

A lot of work awaits us,” said Ngobeni. DM


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