Apr 2015

Nation-wide debit order system could save many faltering municipalities facing bankruptcy

  • Mediaservices on behalf of Stratcol and PS&S
  • Print Media

It was entirely feasible to collect at least a substantial portion of the more than R100-billion owed by defaulters to municipalities if the correct procedures were followed.

Hennie Heymans, CEO of StratCol, one of the largest debit order processing companies in South Africa, said they had already received enquiries from a number of municipalities who wanted to give their ratepayers the opportunity to pay for electricity and water by means of debit orders rather than queuing for lengthy period at council offices to pay their accounts,

His comment follows hot on the heels of a forceful declaration by the  SA Local Government Association (Salga) who is gunning for thousands of defaulters owing municipalities almost R100 billion by introducing a law that would set up an agency, similar to the SA Revenue Service (Sars), to attach people’s salaries (via garnishee orders).

Representatives of Salga told the standing committee on appropriations in Parliament that the agency would have powers to do what municipalities have failed to do over the years – collect debt.

Heymans said he believed very strongly that it was not necessary to resort to such draconian measures as garnishee orders docking employee salaries if ratepayers were given the option of paying their outstanding debt by debit order.

“While there is certainly a culture of non-payment among some consumers who have been using services for years without paying a cent, there are far more responsible individuals who would be willing to pay if local authorities made it easier for them.”

Fred Steffers, MD of payment systems company PS&S said his company would work closely with StratCol in an attempt to set up a nation-wide debit order system for municipalities.

“We know from a statement made by Salga’s head of the finance working group, Subesh Pillay that municipal debt has more than doubled in the past five years, rising from R43bn in 2010 to a staggering R93bn in 2015.

“It is in everybody’s interest that these outstanding funds are collected so that municipalities can provide the quality services their residents are demanding – often through violent service delivery protests.”

Steffers said they would be prepared to offer municipalities discounted rates for bulk debit order collections in order to kick-start the process.

“At least one municipality (Westonarea) has awarded a tender to a company to assist them with their debt collecting process and we are attempting to get a discussion going with several other local authorities who are so deep in debt that they are effectively bankrupt.”

Pillay said while people were able to pay their bonds, clothing accounts and school fees, they defaulted on municipal accounts.

The National Treasury told Parliament last week 60 percent of defaulters were home owners.

Government departments owed municipalities 4.5 percent of the total debt, while businesses and other consumers take up the balance of the debt.

The Minister of Co-operative Governance and Traditional Affairs, Pravin Gordhan, said this week that a third of municipalities were dysfunctional.

Recently, Gordhan submitted proposals to the Municipal Demarcation Board to reduce the number of municipalities through mergers.

He has proposed the scrapping of 31 poor municipalities, to be incorporated into financially strong municipalities, with a solid tax base.
For more information, please contact Fred Steffers on his cell at 083 268 6779 Browse Hennie Heymans can be contacted on his cell 082 732 8654 Browse