Money owed to the eThekwini Municipality by employees has reached record highs, nearly doubling in the past 12 months, with the metro saying the increase is due to the negative economic impact of the Covid-19 pandemic.
While no City employees were retrenched or forced into salary reductions as a result of the pandemic and the economically destructive lockdown to curb the spread of the virus, as was the case with vast swathes of the private sector, as of October this year, 3 339 city employees owed R31.6 million, up from R16.5m 12 months ago.
Most of the debt is related to rates and services such as electricity and water provision.
The level of staff indebtedness is disclosed in the city’s October 2020 Budget statement report.
The Mercury compared the staff debt to that of October last year and previous years, as far back as 2014.
The staff debt could be seen as a snapshot of the financial difficulties being faced in households across the municipality, who are battling with above-inflation increases in rates and services year-on-year, which has been exacerbated by the Covid-19 pandemic.
Since 2014, the City has increased property assessment rates by 6.9% per annum, except this year, when the increase was 4.9%.
Combined with increases in electricity, which the City does not control, and water, both of which have VAT added, as well as other service charges, middle-class households have seen their bills increase by between eight and 13% per annum.
Among the City staff owing the municipality are 64 executives and senior management personnel, the majority of whom are paid from R1m to R4m per annum, excluding generous performance bonuses.
The debt also includes 126 middle management staff and 2 867 general staff members who collectively owe R28.4m. The rest is owed by 27 councillors (R574 094) and 255 Ward Committee members (R2.7m).
So excessive is the debt that if deemed unrecoverable, which the City has said it is not, it would rank as the 11th highest “bad debt” owed to eThekwini, behind insolvent estates, which stands at R38.5m.
Despite the City maintaining it has an aggressive collection strategy, the employee debt levels have consistently increased.
To put the growth of non-payment by staff into perspective, take into account that in October 2014 total staff debt stood at R9.4m. In October last year, it was at R16.4m – a rise of 75%.
If 2014 is compared with October this year, however, staff debt increased by 237%.
According to the City’s 2014 and 2019 annual reports, the staff headcount grew from 21 340 to 24 476.
If the total staff debt is divided equally between all staff, in 2014 each staff member would have owed R439. Last year, this number rose by 52% to R671, and this year it ballooned to R1 292 per employee.
This year, the amount of staff in debt to the municipality made up 13.6% of the City’s total staffers, up from 7% in the previous year and 8.3% in 2014.
“All debt has increased due to the suspension of credit control procedures for a number of months when there was lockdown. This was done as a courtesy as some residents were facing financial difficulties. Disconnections were not being actioned during that time,” municipal spokesperson Msawakhe Mayisela said.
He said defaulting staff did not receive special treatment, and were subjected to the normal credit control processes such as “disconnections, redlining with the credit bureau, final demands and judgments”.
“Salaries are also deducted although the deduction is limited to 25% of the net salary. No one is protected. Staff are treated the same as ordinary customers when it comes to disconnections. Even more so because with staff, monies can be deducted from their salaries if they fail to pay. Staff accounts are not written off,” said Mayisela.
Also disclosed in the report is that the City’s overall outstanding debt has increased to nearly R15 billion, of which R2.3bn is unlikely to be recovered.
“The recovery process in the City’s collections is anticipated to be long and slow due to the impact the virus has had on the economy, which was already struggling even prior to the pandemic,” said the report, which revealed limited disconnections for non-payment had started.
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