Councils Bankrupt

NEARLY two years after President Robert Mugabe’s government ordered councils across the country to write-off arrears owed by ratepayers in a desperate bid to drum up support for ZANU-PF, the local authorities are now bankrupt and tottering on the brink of collapse. 

The Financial Gazette can report that councils have been unable to operate in the black ever since they were forced to cancel millions of dollars that were owed to them by ratepayers, businesses and government itself.

The directive — issued in the thick of electioneering as ZANU-PF sought to escape from an uneasy coalition government — has had dire consequences on councils, both urban and rural.
Councils Bankrupt
It has bred delinquency among most ratepayers who are not even bothering to pay their bills in the hope that the ruling ZANU-PF might issue another directive towards the 2018 polls to expunge their debts with councils.

But while ZANU-PF succeeded in pulling the rag from under the opposition’s feet by winning the 2013 vote resoundingly, the order has come back to haunt the party as service delivery has declined to its lowest ebb across all councils.

Indications are that the arrears have since doubled from the pre-July 2013 levels when Local Government Minister Ignatius Chombo directed councils to cancel debts that were running into several millions of United States dollars.

The little revenue still flowing into municipalities’ coffers is being consumed by salaries, leaving nothing to go towards infrastructure development and service delivery.

The state of infrastructure across councils has therefore deteriorated so much that restoring it will cost an arm and a leg.

Service delivery has also become non-existent, with the scourge of corruption worsening the plight of councils.
Investigations by the Financial Gazette revealed that 10 of the country’s 32 urban councils are being owed in excess of US$600 million.

Rural authorities have been the worst hit.

Their failure to collect revenue in the face of northward bound salary arrears has driven them towards the brink of insolvency.

Martin Moyo, president of the Urban Councils Association of Zimbabwe (UCAZ), said the amount of debt owed to councils has become phenomenal.

“After cancelling debts (in 2013) dating back to 2009, by last year the debts had surpassed by double the amount that had accrued over four years,” he said.

Moyo said while councils were desperate for revenue, there was nothing to collect because people and businesses simply do not have the means or money to pay for services.

Government has been the worst culprit.

It has been unable to pay for services including remitting its workers’ contributions towards medical aid and the pay-as-you-go National Social Security Authority scheme.

Among the urban councils, the situation in the capital city has reached critical levels.
Harare City Council (HCC) is being owed more than US$300 million in unpaid council rates and bills accrued since 2013.

HCC, whose budget of US$272 million is yet to be approved by government, is blaming tough economic times for the massive rates arrears that have left it US$337 million poorer.

According to a council report, the debt relates to outstanding property rates, monthly water and sewer billings, business rentals and other charges.

A recent full council meeting adopted a recommendation by the municipality’s management to pursue the owed rates through legal means as well as disconnecting water supplies to defaulters.

Council officials are already moving around high density residential areas disconnecting water.

Some of the areas affected include Budiriro, Kuwadzana, Glen View, Warren Park and Dzivaresekwa.
Harare municipal employees last month went on an industrial action after they went for six months without receiving their salaries.

Trynos Moyo, HCC’s finance committee chairman, said the high level of non-payment has forced the council to abandon some projects and therefore council would need to vigorously follow up on defaulters to get things going.

“Any outstanding amounts which relate to the period after June 2013 will be either subject to payment arrangement or some other form of recovery action,” he said.

Bulawayo, the second city, is owed US$104 million, which is equivalent to 65 percent of its 2015 budget, amounting to US$158 million.

Bulawayo mayor, Moyo, said the 2013 directive prejudiced the city of nearly US$50 million which was tied in arrears.

This seriously affected council’s ability to provide services such as water and sewer reticulation, refuse management, road and general infrastructure maintenance.

Other urban councils such as Gweru, Masvingo, Mutare and Chitungwiza have not been spared either.

In order to release resources towards service delivery and infrastructure development, Chombo has been acting tough on councils, directing them to reconsider their priorities.

He has of late been insisting on the local authorities to reduce their wage bills to between 30 and 40 percent of their budgets from as high as 80 percent in some cases.

Chombo has on several occasions refused to approve many budgets from councils because of what he described as “obscene” salaries which has led to local authorities like Harare, Gweru and Kwekwe being forced to operate without budgets.

Currently, most councils are spending more than 70 percent of their budgets on wages, a situation which is ironically similar to that of government, which is struggling to sustain a wage bill that is chewing 80,1 percent of the National Budget.

While Chombo, who could not be reached for comment, blames the councils for poor management, he has himself come under fire for driving most of the councils, largely led by Morgan Tsvangirai’s Movement for Democratic Change party, to the wall for political expediency by making it impossible for them to independently run the councils.

And as Zimbabwe’s economy continues to shrink from a tightening illiquidity situation, rising unemployment and a fast disappearing formal sector, collection of rates by councils has become critically tough.

Fears abound that if the situation persists service delivery will deteriorate and the country could once again retreat to the 2008 situation when Zimbabwe faced its worst cholera outbreak that killed more than 4 000 people and affected close to 100 000 others across the country.

The disease then spread across the borders before the international community came to the rescue.

While, on the one hand, most residents are now barely raising enough income from the country’s highly informalised economy to pay the huge amounts they owe their councils, on the other hand, businesses and government itself, which normally depend on a formal regime, are struggling to raise enough to meet basics like paying wages.

The economy has virtually receded into the unpredictable and chaotic informal sector that has bred the largest number of vendors the country has ever witnessed in its entire history.

The vendors’ income is also equally unpredictable, making it difficult for councils to expect any improvement in revenue collections.

Through their associations, Harare residents have blamed council for an anomalous billing system which has seen some of them receive monthly bills of up to US$1 000 while others continue to receive water bill invoices when they last witnessed water coming out of their taps over 10 years ago.

Harare Residents Trust (HRT) director, Precious Shumba, said while residents have an obligation to pay their ‘actual debts’ arising from services rendered to them by public service providers, the city’s management has no moral authority to demand the outstanding debts since even the money trickling into its coffers is being abused.

“They have to cut their salaries and do away with a host of devious other allowances they are giving themselves. Their bloated workforce is consuming over 80 percent of revenue,” he said.

Despite the directive by government to cut the obscene management salaries, city bosses continue to live large.
For example, town clerk, Tendai Mahachi earns US$23 300 per month in salaries and benefits, according to a salary schedule submitted to government in March last year.

This means council has fallen foul of the Urban Councils Act which indicates that 70 percent of revenue should be directed towards service delivery with the remainder going for salaries.

“Lawsuits against the residents will leave council without any finances. As residents, we have the right to defend our rights in courts if it comes to that,” Shumba said.

“Currently, the HRT is urging all responsible residents to pay at least US$10 for their properties according to their zones targeting property tax and fixed water charges,” he added.

Combined Harare Residents Association chairman, Simbarashe Moyo also urged council to consider other methods of recovering the money and earning more revenue other than suing residents and disconnecting their water.
Local government experts say councils may continue to sing the blues for as long as they remain open to political interference.

They said the involvement of the Minister of Local Government in local authority business has reduced local authorities to appendages of central government.

“Elections, the only viable weapon available to local government residents, has been rendered useless as government can, with impunity, remove the elected officers and deny the electorate an opportunity to replace the dismissed policymakers.

There are also increasing and worrying tendencies by central government to centralise certain functions previously undertaken by local authorities. For instance, central government has now taken over the provision of water to Harare City Council and neighbouring councils,” observed the Zimbabwe Institute in 2005. – FinGaz

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