Johannesburg is facing a worsening financial crisis, with a new report warning that the city is increasingly relying on revenue it may never collect.
The Centre for Development and Enterprise (CDE) says Johannesburg is operating on what it describes as “fiscal fiction”, as the gap between revenue billed by the municipality and the money it actually collects continues to widen.
According to the report, unpaid municipal bills have increased dramatically over the past decade, rising from around R15 billion to nearly R72 billion.
The CDE says roughly one in every six rand billed by the municipality is now going unpaid.
Analysts warn that the growing levels of non-payment are creating a debt spiral for the City of Johannesburg. As more residents and businesses fail to settle their accounts, the municipality is forced to increase tariffs and charges on customers who continue to pay.
This, in turn, places additional financial pressure on households and businesses that are already struggling with rising costs.
The report also points to a significant difference between Johannesburg's reported revenue and the actual cash collected by the municipality.
While the City's financial statements may indicate relatively strong revenue figures, the reality is that much of this income remains outstanding, leaving the municipality facing a growing cash-flow problem.
The worsening collection rate threatens the City's ability to maintain infrastructure, deliver services and meet its financial obligations.
The CDE has warned that addressing Johannesburg's revenue collection problems will be critical if the municipality is to stabilise its finances and prevent the debt crisis from becoming even more severe.