KNYSNA NEWS - History was made on Tuesday 29 August when a unanimous Constitutional Court judgement was delivered by Judge Edwin Cameron, which declared that historic municipal debt attached to property cannot be collected from new property owners.

The impact that this has on the average resident is enormous. Many transfers of property have simply not taken place and prospective sales have fallen through because a vast amount is owed to the municipality in arrear rates and taxes.

Until now, property could not be transferred without a rates clearance certificate being obtained from the municipality. Because of this, municipalities could be said to have been tardy in enforcing the collection of such outstanding debt as until now, they were secure in the knowledge that they would get their money when the property was sold.

This is now no longer the case. Cameron made it perfectly clear that municipalities have adequate mechanisms in place to collect debts due and they must do so. They need the revenue generated to perform their constitutionally mandated duty of service delivery and, therefore, must ensure that arrear debts are collected.

The provisions contained in Section 118(3) of the Municipal Systems Act (MSA) – which municipalities have until now relied on to collect historical debt from new purchasers – has been declared unconstitutional.

It is uncertain what steps municipalities will now put in place to ensure that arear debt is collected from the party responsible for incurring it, and it is equally uncertain at this stage what impact this will have on the budgets and financial position of municipalities.

Debt due is reflected as revenue that will accrue to the municipality and impacts on the financial position of the municipality. Much of this may well have to be written off, as prescription may have set in, or the amounts may simply be irrecoverable.

Knysna
When approached for comment, Knysna municipality's communications officer Chumisa Kalawe responded as follows:

"The knock-on effect of the accounts in arears is quite significant as can be seen from the amount of revenue the municipality will be losing. The Knysna municipality has implemented and enforced stricter revenue collection. The municipal budget 2017/2018 was adjusted by cutting municipal expenditure, setting a precedent that will be followed in the next three years.

"The municipality will now be forced to start cutting expenditure not related to its mandate, in terms of the Constitution. The organisational redesign (new macro structure) must take this factor into account. Council will only budget in terms of its affordability levels.

"A review of line items, specifically other expenditure and employee-related costs, will be conducted in October/November 2017 in order to inform the new budget cycle."

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