With a debtors book totalling R18bn, the Nelson Mandela Bay municipality wants to write off R88m of Africorp’s R176m municipal bill and R32.5m of Precision Properties’ R65m account.
In other cases, such as with the Coega Development Corporation, settlement offers are being discussed.
A report on the proposed write-offs was first tabled during a March budget and treasury committee meeting and was again brought to the committee last week.
On Friday, budget and treasury political head Khanya Ngqisha said the city’s debt totalled about R18bn, with some unpaid accounts dating back more than a decade.
“It can’t be business as usual because the debt book is becoming a liability,” he said.
The municipality is in talks with multiple businesses to recoup outstanding arrears.
The report indicates that several businesses are undergoing liquidation, while lawyers are handling additional cases.
Ngqisha said any business wanting a write-off was welcome to approach the city.
“We also need to lure clients to come and make payments.”
Ngqisha said a plan was in place and account holders must pay a 2.5% deposit on their overall debt up front.
“The remaining debt must be paid within 12 months. If you miss a single month, the write-off will be reversed.
“It is a method that will assist the city in increasing the revenue collection rate, which is low.
“There is no business or person who won’t pay, knowing the consequence of having to pay their huge debt.
“Two weeks ago, the eThekwini municipality did the same thing.”
The proposal still needs to be approved by the council.
In the report tabled before the committee, chief financial officer Jackson Ngcelwane said the metro’s debtors book was growing at an unprecedented rate.
“Generally, the cause of the growth [in] arrear accounts is understood to be the effect of the Covid-19 lockdown, the increase in water tariffs implemented and unfavourable economic circumstances in the province, with it also having the second-highest unemployment rate,” Ngcelwane wrote.
He said the effect was felt by nonprofit and non-government organisations.
The March budget and treasury meeting approved the writing off of 50% of Africorp International Properties’ R176m debt to the municipality.
Until recently, a historical set-off arrangement between the municipality and Africorp allowed the company to withhold payment on arrears because the metro owed it rental fees.
“These arrangements predate the writer of this item joining the institution, and there is no formal agreement that was signed by both parties of the set-off agreement that could be retrieved.
“However, various attempts were historically made by senior officials within the institution to resolve the matter that would result in the customer paying their full account and the municipality settling what is owed to the customer.”
These attempts have had little success.
“One of the key dependencies of making progress with resolving the temporary set-off and advocating for an official settlement agreement has been the ability of the municipality to accurately calculate what it owes to the customer.”
The corporate service department is responsible for this.
“This process has proven to be a challenge that requires the directorates that have in the past and now occupy buildings of Africorp to provide critical input that includes and is not limited to the service area that was and is occupied for the calculation to be accurate and align with expired and active lease agreements.
“This work is ongoing by corporate services.
“It is envisioned by the budget and treasury directorate that a possible settlement agreement is the most likely outcome to avoid costly litigation between the two parties while the corporate services continue to lease office space from the customer.”
The municipal legal fees have accumulated to R650,000 for Africorp.
Africorp International Properties chief executive Nadir Jeeva did not respond to telephone calls or questions by the time of publication.
Emails sent to Africorp were also not responded to.
During the budget and treasury committee meeting, councillors also approved the writing off of 50% of the R65m debt owed by Premier Precision Property Management.
The company owns multiple industrial and commercial properties. This decision also needs council approval.
According to the report, in recent years, the company invested in student accommodation that houses more than 2,300 people in various properties.
It said several factors affected the company’s bottom line:
- In 2017, the business was unable to secure tenants for two of its major industrial parks;
- In 2019, the effect of the economy put a heavy strain on its finances; and
- In 2020, the Covid-19 pandemic led to dramatically reduced student numbers, causing the company to lose its main source of income.
“The audited annual financial statements reflected a significant loss for 2023.
“However, the balance sheet of the business does reflect a significant balance for its investment properties.
“Additionally, the company also provided a three-month bank statement reflecting the cash resources at its disposal.
“The bank statement reflected a considerably high overdraft balance in the range of R10m.
“On various occasions over the last 12 months, [the metro] implemented disconnections of some of the properties of the customer to recover the arrears.
“On each occasion, the customer requested reconnections by making commitments to pay.”
Premier Precision’s Sameera Moosa did not respond to telephone calls, WhatsApp messages or emails by the time of publication.
The report also revealed that the municipality had entered into write-off discussions with the Coega Development Corporation on its R218m debt.
However, Coega spokesperson Andile April said it had lodged a counterclaim of R165m against the municipality.
This pertained to payments previously made to service providers on behalf of the municipality.
“After a comprehensive reconciliation of the outstanding amounts between the Nelson Mandela Bay municipality and the CDC, the municipality has validated that it owes the CDC R165m as of the end of January 2025.
“It is important to note that this figure does not include the electricity rebates owed to the CDC by the municipality for the period from November 1 to January 31.
“Both parties are now engaged in discussions regarding a draft settlement arrangement aimed at offsetting the claim and resolving the remaining balance.
“However, this arrangement has yet to be finalised.
“We remain committed to working collaboratively towards a resolution that benefits both parties and the community we serve.”
The Herald
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