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Home / Analysts rubbish municipal debt write-off proposal 

Analysts rubbish municipal debt write-off proposal 

2022-09-19  Kuzeeko Tjitemisa

Analysts rubbish municipal debt write-off proposal 

Economic analysts have dismissed the proposal by Landless People’s Movement parliamentarian Henny Seibeb to permanently write off the water and electricity debts of local authorities as unsustainable and unrealistic for both utility companies and local authorities.

Seibeb last week tabled motions in parliament seeking strategies to permanently write off the water and electricity debts of local authorities, who reportedly owe about N$1 billion to NamWater and over N$807 million to NamPower.

“I am fully aware that writing off debts without providing measures to ensure that the same situation does not recur will make any write-off interventions unsustainable and wasteful, and fatal in the least,” Seibeb told lawmakers while tabling the motions in parliament. 

He said just like water, electricity is both a human right as well as a developmental matter. 

“Modern-day society cannot function without electricity. The rights of people to a dignified life is amongst others anchored on the availability of services such as electricity. Equally, and importantly, no significant economic development can occur in local authorities or in any country if the supply of reliable electricity is not secured,” Seibeb added.

However, analyst Josef Kefas Sheehama said when considering a write-off of NamWater and NamPower debts, it is beneficial that the local authorities be prepared and able to provide the same consideration to every taxpayer in the same situation.

“It needs to be acknowledged that not all the outstanding debt of about N$1 billion to NamWater and over N$807 million to NamPower are realistically collectable, as these amounts are inclusive of interest on arrears and other recoveries,” he stated.

Sheehama said local authorities are expected to be more meaningful in facilitating social and economic development at the grassroots level. 

This, according to him, demonstrates that the success or failure of local authorities depends on their revenue base, the fiscal resources available, and the way these resources are utilised.  

Another analyst, Omu Kakujaha-Matundu, also said the proposal is unsustainable.

“Water and electricity are some of the basic human needs, if not rights. The question is: how do we pose the write-offs, as proposed by Seibeb, and make these basic necessities affordable to the
poor? In most cases, defaults are not because of resistance of some kind but because of high utility tariffs, unaffordable to the majority. Without addressing the cause, we will have perennial write-offs, which in the long-term will affect utility provision to the poor,” opined Kakujaha-Matundu.

Furthermore, Sheehama said central to the matter is the ability of local authorities to generate substantial financial resources, which
is one of the tripartite goals of every local
authority in Namibia. 

“It is a common practice amongst most municipalities, when preparing their annual budgets, to overstate or inflate revenue projections, either to reflect a surplus, or on the surface to show that excess expenditure requirements are adequately covered by revenues to be collected,” he noted. Therefore, Sheehama said, the revenue estimates are seldom underpinned by realistic or realisable revenue assumptions, resulting in municipalities not being able to collect this revenue, and as a result finding themselves in cash flow difficulties.  “Should such situations arise, municipalities must adjust expenditure downwards to ensure that there is sufficient cash to meet these commitments,” he explained. With the current macro-economic thrust the country is embarking on, Sheehama said a debt write-off will not work. 

“It will not happen. Local authorities should be viable without depending on the government. The anticipated write-offs will encourage municipalities and ratepayers not to pay bills, deepening the malaise in the respective SOE’s already saddled with bad debt.

The ability of municipalities to collect their own revenues are largely influenced by their socio-economic circumstances,” he stressed.

Sheehama furthermore observed that local authorities themselves also show little fiscal effort in raising their own revenues from non-poor households, businesses and from charging for services. “The consequence is that these municipalities are becoming increasingly dependent on government bailouts by asking for a permanent write-off,” said the local economist.

He said given that effective fiscal decentralisation requires meaningful revenue autonomy, the country must first ask how much revenue autonomy is needed. “The local authorities are fully aware of people’s constitutional right to access water and electricity. Therefore, these motions must be addressed to the grassroots  before debts are written off,” he continued.

2022-09-19  Kuzeeko Tjitemisa

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