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City to write off R1,5 billion in debt accrued before September 2003

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City to write off R1,5 billion in debt accrued before September 2003

by City of Cape Town
21 Jun 2007
City of Cape Town
City of Cape Town

A statement by Ian Neilson, the Cape Town Mayoral Committee Member for Finance regarding the City's writeoff of a portion of the outstanding debt owed by residents and property owners for rates, service charges and housing rentals.


Statement by Ian Neilson, Cape Town Mayoral Committee Member for Finance

Residents and property owners in the city have outstanding rates, service charges and housing rentals of approximately R4 billion. A portion of this debt goes back many years, some of it more than 10 years.

I will be recommending to Council next week that it approves the write-off of all outstanding debt and related interest which arose prior to September 2003.

This amounts to some R1,5 billion.

The debt will be written off against existing balance-sheet provisions for bad debt, which currently stand at R3,1 billion.

There will be no direct impact on cash flow or future rates and tariffs.

The date of September 2003 was chosen because it is the most practical date, being when the current financial system was implemented. It will in addition allow the City to close down the "legacy" financial systems from the previous administrations, which are becoming more and more difficult and costly to maintain.

The proposed write-off has been discussed with the Auditor-General's office and we believe that we have met their requirements. The write-off will allow the Revenue and Housing Finance Department's to concentrate on collecting the remaining debt, all of which arose during the period of equitable rates and services and free basic services. There is no remaining reason for objections on the basis of inequity, to the payment of the outstanding amounts. The City's credit control policy will continue to be rigorously enforced.

The City has for the last year driven a tough campaign to collect this debt. The campaign has been very successful, and over 120 000 people have come forward to either settle their debt or to make arrangements to pay it off.

The City's finances are in a strong position due to this determined action to collect debt.

It is only because we have re-established a culture of payment that we are now able to write off the pre-September 2003 debt.

It is also the success of the debt recovery drive over the past year, combined with the City's strengthened financial position that has made this write-off possible. It is a very different approach to the moratorium on debt actions introduced by the previous Mayor in 2002. That moratorium led to a severe weakening of the City's finances, and delayed the ability of the City to take the step of a general write-off of old debt. It took the process of the past year to put the City in a position to make this bold step possible.

This write-off draws a line under the past and prepares the way for the future. Similar general debt write-offs cannot be expected to occur again in the foreseeable future. In the mean time, people who refuse to pay their debts, or refuse to come forward to register on our indigency policy if they cannot pay, can expect to face action from the City.

END

MEDIA RELEASE
NO. 232/2007
20 JUNE 2007


ISSUED BY:
DIRECTORATE: COMMUNICATION
CITY OF CAPE TOWN
TEL: 021 400 2201

MEDIA QUERIES:
COUNCILLOR IAN NEILSON
CELL: 083 306 6730

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