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Councils in Catch-22 over defaulters

BROKE local authorities across the country last week made a controversial announcement saying they are going to slash by 40-50% debt that has been accrued by commercial, industrial and institutional customers.

Wongai Zhangazha

The announcement came after the local authorities said they are owed over US$500 million in unpaid bills by residents, government departments, industry and commerce, hence the failure to provide basic services.

Some of the local authorities said they were going to offer between 40 and 50% discounts to debtors as a way of encouraging payment of bills, while others were still in discussions to ensure that customers pay outstanding bills.

Government and residents are the biggest debtors, councils say.

However, analysts have questioned whether the decision to slash the bills was a solution to enhance council revenues and resuscitate operations at local authorities, riddled with corruption, so they are able to improve service delivery and pay its workers, some of whom have not been paid for more than three years.

While residents are demanding an explanation on how much each corporate owes, they are also challenging the local authorities to justify the cancellation done through local media.

“Corporates make profit from our water, so it’s not a question of merely wanting to encourage them to pay what they owe, but to juxtapose their profits with their continued refusal to pay,” said a Harare resident, Pamela Ncube.

“Once that is done, we can then get a clearer understanding as to the city’s motive and the reasons behind the corporates’ recalcitrance yet they promote corporate social responsibility on a regular basis.”

Social commentators this week said the solution did not only lie in slashing the bills, but providing a fair and just billing system in these difficult economic times.

“Slashing” of anything has never brought any meaningful results. The 2006-2009 period easily comes to mind when, on several occasions, the Reserve Bank of Zimbabwe slashed zeros on the Zimbabwean dollar as it grappled to fight inflation. This idea, however, did not work and inflation in July 2008 reached a record 9 030 000%.

This is just one example that shows that slashing of bills or anything else does not work.

In Bulawayo, the local authority in February offered 50% discounts for corporates settling accounts by end of June and had to extend it to September because there were no takers as companies in the “City of Kings” grappled with economic challenges.

Gweru City Council, in a statement said it would write off 50% of rates and service charges on all bills for industry, commerce and institutions for the period July 2014 to December 2014 due to the liquidity challenges facing their clients and economy at large.
In a public notice, Kadoma offered 40% discount to business, industry and institutions provided they paid 60% of the total amount owed by October 31 and if they kept their accounts up to date for the 10 months starting January to October 2014.
Industries in Bindura were offered a 45% discount as a way of improving revenue.

Government departments, as of May, owed Harare US$15,5 million, industry and commerce US$130 million, while the satellite towns of Chitungwiza, Norton, Ruwa and Epworth owed a combined US$3,4 million.

However, the write-offs will create a culture of not paying as they would eventually be written off — the larger the debts consumers accumulate, the more likely the bills will be slashed.

Economic analyst Godfrey Kanyenze said the decision to slash debts was sustainable as companies continued to collapse.

Said Kanyenze: “This is obviously an immediate reaction from local authorities. How do they collect what is owed to them when the companies are collapsing? The economy must grow to address these issues.

“We need a holistic approach, because what they are deciding on is not sustainable. It’s a Catch-22 situation, a paradox which can only be unraveled by undertaking a holistic approach that will deal with real issues and that is where a social contract is needed.”

He said the social contract would mean dialogue where business, labour and key stakeholders identify major constraints facing the economy and come up with measures to deal with the problems. This, he said, worked in Asia.

“We can’t address our challenges without social cohesion. Companies continue to collapse. What is needed is to recover these enterprises and make sure people have jobs. As long as these constraints are there, they will not be able to meet the obligation,” said Kanyenze.

Harare Residents Trust (HRT) committees’ chairperson Pretty Chabuda said while the economy can be blamed for people failing to pay their debts, local authorities such as Harare were riddled with corruption.

“We might want to blame the economy, but it’s not the only issue. These councils are failing to provide services to the companies and residents as well. Most companies and residents have relied on buying water in bulk from other countries. So they don’t see why they should pay for services not provided,” Chabuda said.

“Instead, council should be one providing the bulk water — it is creating a gap. Last week, HRT toured Morton Jaffray Waterworks and one of the pumps was not working. Yet these councils can afford to buy luxury vehicles for themselves. What does it solve? They are creating a dependency syndrome to residents and companies as well.”

She said her organisation was not happy with the move by the local authorities because they had received reports of corrupt activities in the treasury and water departments.

“While some companies might fail to pay due to different reasons, some however have taken advantage of the situation. We also have information that employees in the water department are benefiting from this situation and also some companies whose names we have been given, but cannot mention them as we are still gathering information,” said Chabuda.

Social commentator David Takawira said the solution did not come in slashing bills, but providing consistent supply of service and billing that is fair and just to ratepayers who are losing jobs.
He said slashing would only create a culture in which residents and companies would not pay their bills.

“The highest debtors are the higher level people in key positions and those of us who pay religiously continue to subsidise those that have huge debts,” he said.

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