CHAIRPERSONS LETTER TO DIRECTOR GENERAL, NATIONAL TREASURY

Port Alfred Ratepayers’ and Residents’ Association

The Director-General
National Treasury
Republic of South Africa

Dear Sir/Madam

1. PURPOSE OF THIS LETTER 

The Port Alfred Ratepayers and Residents Association (PARRA) hereby requests that National Treasury urgently review the substantial debt write-offs undertaken by Ndlambe Local Municipality during the 2025/26 financial year. We have obtained and analysed a municipal listing entitled "WRITEOFFS 20252026 LISTING WITH NAMES", which records debt write-offs totalling:

R51,019,810.89 

The magnitude of this amount, together with the composition of the write-offs, raises serious questions regarding:

• whether all reasonable recovery measures were exhausted;
• whether the write-offs complied with Ndlambe's approved Credit Control and Debt Collection Policy;
• whether the Municipality's Indigent Policy was correctly applied;
• whether proper investigations were undertaken before debts were classified as irrecoverable;
• whether the required authority approved each category of write-off;
• whether adequate supporting documentation exists;
• whether the accounting treatment complies with the MFMA, mSCOA and National Treasury requirements;
• whether the Municipality has adequately protected municipal revenue; and
• whether any of the write-offs potentially constitute an avoidable loss of public funds.

We therefore request that Treasury obtain and scrutinise the complete supporting documentation and, where appropriate, refer the matter to the Auditor-General South Africa.

2. MAGNITUDE OF THE WRITE-OFFS

The spreadsheet provided to us records the following

• The R27.89 million deceased-account write-offs represent approximately 54.7% of the total.
• The R20.27 million indigent write-offs represent approximately 39.7%.
• The remaining R2.86 million relates to accounts classified as "Others".

The scale is therefore not insignificant. It represents more than R51 million in municipal revenue that has effectively been removed from the Municipality's debtor book. In a municipality experiencing severe financial and service-delivery pressures, PARRA believes that such a significant reduction in receivables requires rigorous scrutiny. 

3. MUNICIPALITY'S DUTY TO COLLECT MONEY DUE 

Section 96 of the Municipal Systems Act places a positive obligation on a municipality to collect all money that is due and payable to it, subject to applicable legislation.

Municipalities must also adopt, maintain and implement a credit-control and debt-collection policy consistent with their rates and tariff policies.

Consequently, the starting point cannot simply be: "The debt has been outstanding for a long time, therefore it may be written off.” The Municipality should be able to demonstrate, for each write-off category, that the debt genuinely became irrecoverable and that the Municipality followed the required recovery processes

4. DECEASED DEBTORS – R27,893,622.24 

PARRA is particularly concerned about the R27.89 million classified as deceased write-offs. The death of an account holder does not automatically extinguish a municipal debt.

The Municipality should first establish whether:

• the deceased person's estate exists;
• the estate was reported to the Master of the High Court;
• there are assets in the estate;
• the property remains registered in the deceased person's name;
• the property has subsequently been transferred;
• there is an executor;
• claims were lodged against the estate;
• there are surviving spouses or other persons legally liable;
• the property itself provides security for outstanding rates; and
• the debt can legally be recovered from the estate or subsequent owner.

We therefore request that Treasury require Ndlambe to provide a property-by-property schedule showing what recovery action was taken before each deceased account was written off. A deceased debtor should not simply become a mechanism through which municipal revenue disappears from the debtor book. 

5. INDIGENT WRITE-OFFS – R20,266,800.56

The R20.27 million indigent write-offs also require detailed examination. PARRA fully recognises the importance of protecting genuinely indigent households. However, indigent support and debt write-off are not necessarily synonymous.

Treasury should determine whether Ndlambe:

1. verified each household's indigent status;
2. applied the approved Indigent Policy;
3. conducted the required means testing;
4. periodically reviewed the indigent register;
5. correctly distinguished qualifying indigent debt from ordinary arrears;
6. correctly applied free basic services and indigent subsidies;
7. pursued amounts that remained legally recoverable;
8. obtained the required approval for each write-off; and
9. correctly accounted for the resulting debt impairment and write-off.

The Municipality must not use an indigent classification as a blanket mechanism to eliminate historical debt without proper verification.

6. "OTHER" WRITE-OFFS – R2,859,388.09

The category that concerns us most from a governance perspective may actually be the "Others" category. The spreadsheet records R2,859,388.09 in this category.

This category appears to include businesses, organisations, government entities and individual account holders, rather than merely deceased or indigent residential consumers. That makes the basis for these write-offs particularly important. 

For each such account, Treasury should establish

• the nature of the debt;
• the services/rates to which it relates;
• the age of the debt;
• the recovery steps undertaken;
• whether summons was issued;
• whether the debt was handed to attorneys;
• whether the debtor disputed the account;
• whether the debtor had assets;
• whether a payment arrangement existed;
• whether any settlement was negotiated;
• who recommended the write-off;
• who approved it; and
• the precise legal and policy basis for the write-off.

7. WAS THE DEBT REALLY "IRRECOVERABLE"? 

This is perhaps the central question. A municipality should not confuse: "difficult to recover" with: "irrecoverable". Nor should the cost or inconvenience of recovery automatically justify abandoning municipal revenue. National Treasury guidance on municipal credit-control practices contemplates that long-outstanding debt should be subjected to recovery measures and that write-off should follow an assessment that recovery is genuinely no longer viable. We therefore request that Treasury determine whether Ndlambe has documentary evidence that reasonable recovery measures were exhausted.

8. COMPLIANCE WITH NDLAMBE'S OWN POLICIES

Ndlambe itself publishes a Customer Care, Credit Control and Debt Collection Policy, a Debt Impairment Policy, an Indigent Policy, and a Write-Off of Irrecoverable Debt Policy amongst its financial-management policies. This creates a particularly important audit trail. We request that Treasury compare every write-off against the specific version of Ndlambe's policy applicable when the write-off was approved.

Treasury should establish:

• who may recommend a write-off;
• who may approve it;
• what documentation is required;
• what recovery processes must first be completed;
• whether minimum periods apply;
• what evidence is required for deceased estates;
• what evidence is required for indigent households;
• what criteria apply to commercial/business debt;
• what delegation limits apply; and
• whether Council approval was required.

A municipal policy cannot simply be ignored because management considers a debt inconvenient or difficult to recover.

9. COUNCIL APPROVAL AND DELEGATED AUTHORITY

We request confirmation of the Council resolutions and/or properly delegated authority under which the R51,019,810.89 was written off.

Specifically, we request copies of:

1. Council resolutions;
2. Finance Portfolio Committee recommendations;
3. Municipal Manager recommendations;
4. Chief Financial Officer recommendations;
5. delegation registers applicable to debt write-offs;
6. supporting schedules;
7. debtor-by-debtor motivation reports;
8. indigent verification records;
9. deceased-estate investigations; and
10. audit/review reports relating to the write-offs.

Treasury should determine whether the person or body approving each write-off had the legal authority to do so.

10. ACCOUNTING AND mSCOA TREATMENT

National Treasury has specifically warned municipalities about the distinction between:

• debt impairment;
• reversal of impairment; and
• irrecoverable debt actually written off.

MFMA Circular 126 states that municipalities have historically incorrectly accounted for impairment and write-offs, resulting in unfunded budgets. Treasury further explains that where previously impaired debt is written off, the relevant impairment must be reversed so that the accounting treatment does not artificially distort receivables. We therefore request that Treasury establish whether Ndlambe correctly accounted for the R51.02 million in terms of:

• the applicable mSCOA classification;
• GRAP;
• the Municipal Budget and Reporting Regulations;
• the approved budget;
• the annual financial statements; and
• the applicable debt impairment methodology.

The National Treasury mSCOA structure specifically distinguishes "Debt impairment" from "Irrecoverable debts written off."

11. IMPACT ON MUNICIPAL FINANCIAL SUSTAINABILITY

This matter cannot be viewed in isolation. Ndlambe is simultaneously asking residents to accept substantial increases in rates, electricity, water and other municipal charges. Residents are repeatedly told that the Municipality needs increased revenue to maintain and improve services. Against that background, PARRA finds it extremely concerning that R51 million of debt has been written off.

Residents are entitled to ask:

• Why should compliant ratepayers carry increasingly high tariffs and charges while tens of millions of rands in municipal debt are simply removed from the books?

We are not suggesting that all write-offs are inappropriate. There will obviously be legitimate circumstances in which a debt is genuinely irrecoverable. Our concern is whether the scale, composition and process of these write-offs demonstrate adequate revenue protection.

12. PARTICULAR CONCERN REGARDING REVENUE MANAGEMENT

The Municipal Systems Act requires municipalities to operate effective credit-control and debt-collection systems. If large amounts of debt are repeatedly allowed to accumulate and are subsequently written off, the Municipality may effectively create a situation in which, non-payment becomes financially advantageous to the debtor while compliant residents subsidise the resulting losses.

That would undermine:

• revenue collection;
• financial sustainability;
• fairness between residents;
• the credibility of the Municipality's credit-control system; and
• the integrity of the tariff-setting process.

It may also create a serious moral-hazard problem.

13. REQUEST FOR A FORENSIC REVIEW

PARRA therefore respectfully requests that National Treasury conduct, or direct the appropriate provincial authority to conduct, a detailed review of the R51,019,810.89 write-offs.

We specifically request that the review determine

A. Legality: Whether each category of write-off was legally permissible.

B. Policy compliance: Whether Ndlambe complied with its own approved policies.

C. Authority: Whether every write-off was approved by the properly authorised person/body.

D. Recovery: Whether reasonable recovery measures were exhausted.

E. Indigent verification: Whether all indigent accounts were properly verified.

F. Deceased estates: Whether estates and property-related recovery options were properly investigated.

G. Commercial accounts: Whether adequate recovery action was taken against businesses and organisations.

H. Accounting: Whether the write-offs were correctly accounted for under mascot/GRAP and the MFMA framework.

I. Budget impact: Whether the write-offs were properly reflected in the Municipality's budget and financial statements.

J. Governance: Whether any failures in credit control or revenue management contributed to the accumulation and subsequent abandonment of these debts.

14. REQUEST FOR THE MATTER TO BE REFERRED TO AGSA

Given the magnitude of the amount involved, PARRA requests that Treasury consider referring the matter to the Auditor-General South Africa for examination as part of its audit and/or follow-up processes.

National Treasury's current MFMA compliance work continues to identify weaknesses around municipal financial controls, including the implementation of Council resolutions relating to recoverability and write-offs. We believe that the Ndlambe write-offs warrant similar scrutiny. 

PARRA has been advised by Ndlambe officials that the Municipality regards National Treasury regulations as guidelines rather than binding regulatory requirements and therefore does not necessarily consider itself obliged to comply with them. PARRA regards this position as extremely serious and requests that Treasury formally clarify the legal status of the relevant Treasury requirements and whether Ndlambe's stated approach is consistent with the MFMA and applicable regulations.

15. INFORMATION REQUESTED FROM NDLAMBE

We request that Treasury require Ndlambe to provide the following information:

1. The complete debtor write-off register for 2025/26.
2. The total amount written off by month.
3. The Council resolutions authorising each write-off.
4. The applicable delegation of authority.
5. The full Ndlambe Write-Off of Irrecoverable Debt Policy applicable at the time.
6. The Credit Control and Debt Collection Policy applicable at the time.
7. The Indigent Policy applicable at the time.
8. The Debt Impairment Policy applicable at the time.
9. Individual motivations for each write-off.
10. Evidence of recovery action.
11. Evidence of legal recovery action where applicable.
12. Deceased-estate investigations.
13. Indigent verification records.
14. Commercial debtor recovery records.
15. The accounting entries used for the write-offs.
16. The corresponding impairment reversals.
17. The mSCOA treatment.
18. The effect on the Municipality's outstanding debtor balance.
19. The disclosure in the annual financial statements.
20. Any internal audit or audit committee report concerning the write-offs.

16. CONCLUSION

PARRA is not opposed to the legitimate writing off of debts that are demonstrably irrecoverable. We are, however, deeply concerned about the scale of the write-offs, the categories involved, the apparent inclusion of commercial and institutional debtors, and whether sufficient recovery measures were undertaken before municipal revenue was abandoned. The amount involved — R51,019,810.89 — is simply too substantial to be treated as an ordinary administrative exercise. Every rand written off ultimately has an impact on the Municipality's financial position and, indirectly, on the burden imposed on those residents and businesses who do pay their municipal accounts. We accordingly request that Treasury urgently investigate the write-offs and provide PARRA with a written response setting out the outcome of its review and any corrective action required of Ndlambe Local Municipality. Should Treasury require the underlying spreadsheet and supporting information in our possession, PARRA will make these available. 

We would appreciate confirmation of receipt of this correspondence and the reference number allocated to the matter.

Yours faithfully,

Ren Mouton
Chairperson
Port Alfred Ratepayers and Residents Association (PARRA)

Cc:

Provincial Treasury – Eastern Cape

Auditor-General South Africa

MEC for Finance – Eastern Cape

Municipal Manager – Ndlambe Local Municipality

Mayor – Ndlambe Local Municipality

Chairperson – Municipal Public Accounts Committee