The official opposition, the Democratic Alliance (DA), has slated the City of Johannesburg for cutting off residents and businesses when their bills are in dispute and queries have not been resolved.
The city has been battling to collect revenue as a result of the protracted billing crisis, which was caused by post-implementation issues with its migration from disparate legacy systems to SAP, through Project Phakama. The plan, according to the DA, cost taxpayers more than R1 billion.
Johannesburg started implementing Phakama towards the end of 2009 and wrapped up migration in the middle of last year. However, the move resulted in thousands of residents complaining about grossly inflated bills and a lack of help from the call centre.
Earlier this year, former mayor Amos Masondo admitted to problems, but denied the city had a billing crisis. In April, Johannesburg halted credit control processes while it resolved queries on about 65 000 residents' bills.
The billing mess led to consumers being reluctant to pay bills, and some arrears are the result of incorrect invoices, explains DA shadow finance MMC Patrick Atkinson. He says the city's collection rate was 6% behind where it should be by June, although it did improve in August.
Atkinson says the city has a R1.3 billion shortfall in collections, which has accumulated during the past year, which is a direct result of the billing crisis.
In total, the city is owed R13 billion by residents and only has enough cash to tide it over for 12 days and not the three months required by National Treasury, says Atkinson. He claims the city embarked on an “energetic” campaign to collect outstanding amounts because of the shortfall.
However, the city says it is taking steps to get overdue money in and improved its collection rate to 102% by the end of September.
Dodgy disconnections?
Johannesburg is not following the proper procedures to collect money and, in some cases, is cutting off people who have lodged queries about hugely inflated invoices, alleges Atkinson.
meter.
However, last month, city officials arrived to disconnect the business, which was reconnected after pointing out that it had an outstanding query, says the DA in a statement. Recently, it was again threatened with disconnection.
The party also alleges the city is not following proper procedure when cutting off accountholders. It cites the example of a resident who was only served with a disconnection notice when officials arrived to cut him off.
Fixing the problem
However, the city says it is “committed to the continued improvement in its financial position”.
In a statement issued on behalf of acting CFO Lungelwa Sonqishe, in reaction to the DA's announcement, the city says its cash position has “improved significantly in the first quarter of the current financial year”, which is the result of improved collections.
“The performance in the first quarter of the 2011/12 financial year reflects that the city's revenue has turned the tide. The number of accurately billed customers has increased significantly,” the city says.
Sonqishe says the city has accelerated query resolution and is making “inroads” into collecting old debt, which is evidenced by the 102% collection rate between July and September. He says the city has put measurements in place to ensure that revenue collection improves. These include robust credit control and rolling out smart meters.
”The improvement in the collection levels has positively impacted the cash management strategies of the city.”
Sonqishe explains that cash flow mismatches happen during the normal course of business, because of spending and receiving timing differences. He says this is managed through debt.
Johannesburg is trimming its borrowing levels, which will be limited to R1 billion compared with previous highs of over R2 billion, notes Sonqishe.
“The past three financial years have been characterised by a number of significant events that have had an impact on the financial position of the city.”
These included preparations for the 2010 Soccer World Cup, the global recession and its impact on customers' ability to pay, and a collection level of 87% against a budgeted 93%. “The combined effect of these factors has been a declined liquidity position,” explains Sonqishe.
Johannesburg did not address the DA's claims of illegal disconnections in its statement, and a spokesman was not immediately available this morning to discuss the allegations.
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