Ernest Mabuza and Vukani Mde

THE City of Johannesburg’s finance department intends to propose the sale of part of the city’s debtors’ book through a bidding process.

The debtors’ book profile of the city is R7,8bn. Households owe 79% of the debt and the rest is owed by business.

he department will propose to the council at its monthly meeting next week that R1,5bn worth of the debtors’ book, of debts that are more than 120 days old, be sold. This amount is collectable and does not include debt owed by the poor.

"It makes sense for the city to consider this because it permits the credit control departments to focus their limited resources on collecting current amounts outstanding, and selling the book will simultaneously allow the private sector to try its hand in an area where the city has historically had less success," the city’s finance director, Roland Hunter, said yesterday.

Most municipalities have a serious problem collecting debt. The debt for unpaid services countrywide stood at R32bn at the end of July last year.

Hunter said the sale could be part of a programme to strengthen the balance sheet of the city, providing benefits in terms of audit opinions and credit ratings.

"The proceeds of the sale will be a boost to urgently needed capital expenditure, for electricity, traffic signals and water infrastructure, over the medium term, without incurring additional debt."

Other plans to deal with the debtors’ book include writing off amounts owed by poor people, provided they install prepaid meters.

The department is also considering gradually writing off amounts owed by a middle category of debtors, conditional on the payment of current amounts in full, every month, for 36 months.

However, Qedani Mahlangu, Gauteng MEC for local government, yesterday tore into the city and other debt-ridden municipalities in the province.

She said the city and other municipalities had the means to recover arrears from business.

"I don’t understand why it’s necessary when they have the means at their disposal for full recovery," she told reporters at a briefing on the state of Gauteng’s municipalities.

"My own approach to this (non-payment) is simple: cut services."

Mahlangu said it was unacceptable that businesses, some government departments, and well-off households were not paying for essential municipal services.

She said any auction of part of the city’s debt was an admission that it was failing to make its customers pay for services provided.

But Mahlangu said her department would support such sales across the province provided they brought more money to the municipalities concerned.

Mogale City has also approached her department with proposals for an auction of its debtors’ book.

Johannesburg is in the grip of a billing crisis that has contributed to mounting debts. In total six of Gauteng’s 15 municipalities face similar crises, leading the provincial government to intervene directly.

Serious debt owed by poor households would have to be ring-fenced until the province had an "indigents policy", Mahlangu said.

In another development, the city and its utility companies are considering a R120m upgrade of its billing and customer information technology systems.

The move to a common platform will mark the first time that the billing process will be treated as a single function in the city.