Councils plunge into crisis

via Councils plunge into crisis | The Financial Gazette – Zimbabwe News  by Mandla Tshuma

A DIRECTIVE issued by the government last month ordering municipalities to cancel all debts owed by residents backdating to February 2009 has thrown local authorities into financial turmoil.

In the case of the capital city, council employees have not received their salaries for last month because revenue has literally dried up.

In the second city, the Bulawayo City Council has missed this month’s deadline for the payment of salaries for its workers after the cash-flow situation worsened in the aftermath of the government directive.

The situation follows a more or less similar pattern in other major towns and cities such as Mutare, Chitungwiza, Masvingo and Gweru where operations, just like in Bulawayo and Harare, are wholly funded by residents in the wake of donor fatigue.

Indications are that service delivery could worsen because morale among council employees throughout the country has slumped to its lowest ebb due to the city fathers’ failure to pay their monthly salaries and improve their working conditions.

City fathers interviewed by The Financial Gazette said even those residents who used to honour their dues religiously have since stopped doing so , hoping that the government would continue with its generosity since the operating environment continues to be tough for ordinary Zimbabweans.

This has given rise to a serious cash-flow crisis in all councils. As a result, local authorities are now defaulting on critical payments, including pensions.
Last month, government ordered councils to write off debts owed by individual ratepayers from February 2009 — when the country’s economy was formally dollarised — to June 30, 2013.

In his directive, outgoing Local Government, Rural and Urban Development Minister Ignatius Chombo said it has become apparent that the country’s tottering economy has not been operating optimally and in the process relentlessly unleashing severe hardships on citizens.

“Thus, from 2009, ratepayers have not been able to meet their obligations in terms of payment of taxes, rentals, levies and related charges resulting in an enormous and crippling debt burden frustrating the majority of the population,” reads part of the directive.
“Given the above circumstances, all local authorities are in terms of Section133 of the Rural District Council Act (Chapter 29:13) as read with Section 303 of the Urban Councils Act (Chapter 29:15) directed to write off debts in respect of rentals, unit tax, development levies, licences and refuse charges owed by individuals ratepayers as at 30 June 2013. In the same vein, money owed by residents for rates, stands prescribed in terms of the Prescription Act (Chapter 8:13) as from February 2009 to 30 June 2013.”

Chombo said the directive was meant to cushion individual ratepayers from the severe effects of the economic challenges experienced during the period in question.
At the time, The Financial Gazette warned in its editorial that even after writing off the debts, there was still no guarantee that residents would be able to meet their future obligations no matter how reasonable they might be unless the tripartite arrangement of labour, the private sector and the government work tirelessly to improve the country’s economic fortunes.

In order to provide service, councils rely on various service providers to supply them with chemicals to purify water, spares etc. There are also banks that provide funding for their operations. These suppliers and banks need to get paid or have the loans serviced to remain in business and that payment can only come from the councils’ ability to collect whatever they are owed by residents.
Without government picking up the tab in the form of inheriting the debts, The Financial Gazette said the move would lead to the collapse of suppliers and banks that are exposed to these municipalities while compromising service delivery and exposing residents to health hazards.

“While government has every reason to sympathise with residents and help them out in these difficult economic times, it must not reward defaulters and encourage the dependency syndrome, which has destroyed the country’s economy. By not giving to Caesar what belongs to Caesar, government is leaving a trail of disaster in its wake: Just look at what has happened to the once thriving public enterprises such as Air Zimbabwe, the Zimbabwe United Passenger Company, the National Railways of Zimbabwe, Cold Storage Company, TelOne and other parastatals that are currently on the brink,” the paper warned.

This week, experts said government should have first disbursed at least partial grants or subsidies to municipalities before writing off the debts. Alternatively, government should have first cleared its debts with local authorities to ensure that they are not squeezed financially.
Residents have however, welcomed the debt write-offs. The debt cancelation, especially of water bills, has also benefited mostly senior ZANU-PF officials who owe rural and urban authorities’ substantial amounts from their farming activities.

Before the directive, Harare was owed over US$400 million by corporates and residents, Bulawayo (US$100million) while Mutare was owed US$20 million. In Masvingo, government owes council US$11 million while US$7 million is owed by residents.
On Tuesday, the general secretary of the Zimbabwe Urban Councils Workers’ Union, Moses Mahlangu, described the debt cancellation as something not “worth smiling at”. Unless government bails out municipalities, Mahlangu said the worst was yet to come for both residents and councils.

“If government is sympathetic towards the people, then it must look for money and give local authorities grants,” said Mahlangu.
“Unfortunately, the people are rejoicing. What will happen soon is that local authorities will fail to service their debts and banks will descend heavily on them and residents will end up paying 10 times what they are paying now,” he warned.

The secretary of the Bulawayo City Council Workers’ Union, Nkosiyabo Masuku, said municipal workers feel short-changed by council’s inability to dispense their salaries.
“The council owes us some money and part of that money is what residents owe to the council. As we speak, pay day is already overdue and we have not been paid and the reasons are just obvious,” said Masuku.
While Masuku said the union was not against the cancellation of debts since their members were also residents, he argues that government should have first compensated the local authorities to ensure service delivery was not compromised.

He noted that even those residents who had been faithfully paying their bills immediately stopped soon after the announcement of the cancellation, depriving council of the much-needed monthly revenue.
The outgoing Urban Councils Association of Zimbabwe president, Femias Chakabuda, said the cancellation of debts had weakened municipalities’ balance sheets and subsequently their borrowing capacity.
He said service delivery would decline as a result of councils’ failure to pay their employees adding that it would have been better if government had cleared its own debts before embarking on the move.
“Remember councils need to pay for their water treatment chemicals upfront,” said Chakabuda.

“My assumption is that some individuals in high offices there in government owe councils some money and just wanted to be pardoned together with the poor.”
Former Gwanda mayor, Lionel De Necker, said government’s directive was catastrophic as it was encouraging people not to pay their bills.
“The idea is disastrous. It took years to build a small group of people that paid their bills regularly and now a culture of not paying is being brought back,” said De Necker.
Harare Residents’ Trust director, Precious Shumba, said he does not sympathise with the local authorities because they had allowed corruption and extravagance to impose a heavy penalty on service delivery.

“Firstly, the majority of the citizens who owed the councils had already proven beyond doubt that they had no capacity to pay the charged rates, so in accounting, these debtors had already turned bad,” said Shumba.
“The reason we in the HRT have celebrated debt cancellation is that the senior managers in Harare are earning monthly salaries of US$18 500 for the Town Clerk with the lowest paid director earning plus US$10 000, yet the lowest paid employee is getting around US$150. The level of corruption and extravagance does not make us sympathise with the local authorities as we genuinely believe that their insensitivity towards residents on service delivery has become legendary.”

Bulawayo Progressive Residents Association coordinator, Rodrick Fayayo, said notwithstanding the impact the move would have on service delivery and council employees, a number of residents who were being overcharged owing to the skewed billing system welcomed the move.
He said there was need for a forensic audit on the billing system adding that there was need to incentivise those who have been paying their bills so that they do not relent.