Zim Municipalities In Financial Trouble

Revenue inflows for municipal authorities operating in Zimbabwe have dropped significantly as the harsh economic situation takes its toll.

Residents in towns and cities across the country have once again fallen behind in their payments despite having had their bills slashed to zero on the eve of the harmonised elections held in July last year. As the biting liquidity crunch continues to eat away at ratepayers meagre earnings, many workers are going without pay and others losing their jobs through retrenchments.

Most residents are therefore failing to keep up with servicing their rates, resulting in the accumulation of arrears.

Concerns over the quality of service delivery have become a major point of discussion.

The Bulawayo City Council is currently owed US$90 million, nearly double the US$46 million that the local authority had to write-off last year. Mayor, Martin Moyo, said council had budgeted to collect US$103 million this year to cater for its needs but revenue has since tumbled to US$13 million. The situation is the same in other local authorities in the country.

In Kwekwe, authorities have now threatened legal action against defaulters and are set to engage debt collectors in an effort to recover US$21 million owed by residents in rates and water bills as well as from corporate institutions such as Lancashire Steel, New Zimsteel and Zimasco.

Albert Chirau, chairperson of the finance committee for Gweru, revealed recently that the city fathers were currently collecting US$1,1 million every month, down from US$1,5 million previously.

Resultantly, council employees have been going for months without pay, with council only managing to clear its arrears last month.

Also included in the salary arrears payment was a US$100 cost of living adjustment across the board, backdated to August. The decision to award the 1 300 strong-workforce a cost of living adjustment (COLA) might come back to haunt the cash-strapped local authority, which is struggling to deliver basic social services.

Before the increase, its salary bill stood at US$800 000. With the latest COLA adjustment, council is now forking out an additional US$130 000 monthly.

Prior to the increment, the lowest paid worker was taking home US$310. “There is nothing surprising about the situation we find ourselves in. If you go to any local authority in the country you will find them facing the same problems that we are facing,” said Chirau. “As council we are happy that we are trying our best by making sure that our workers get paid on time. It’s just that residents are not paying their rates not because they do not want to pay for the services but because they do not have money due to the prevailing economic climate.” To improve revenue collection, council has created a debt collection unit. Council is owed US$33 million, which accumulated over a period of 17 months.

The debt could have been more were it not been for a debt relief granted to residents by government ahead of the 2013 elections. The relief saw council being made to write off debts owed by residents, thereby reducing their indebtedness to US$13 million. Council is now attempting to incentivise corporates to clear off their debts.

Companies that settle their bills by December 31 will have their bills slashed by 50 percent. But still, the olive branch has found few takers. Council owes its creditors a total of US$24 million.


Financial Gazette