Who pays? Overstrand residents stuck with R53 million

As I mentioned in a previous article, the Overstrand Municipality, which includes the towns of Hermanus, Gansbaai, Kleinmond, and Stanford, has been running up debt.

In 2021 the Council approved the write-off of “the irregular expenditure in the amount of R2 064 382,56…” In 2023 the Council approved the write-off of “the irregular expenditure to the amount of R2 015 255.07…” In 2024 the Council approved the write-off of “irregular expenditure in the amount of R1 037 500.00.”

Then at its ordinary meeting on 29 October 2025, the DA-led Overstrand Council resolved to write off irrecoverable debt totalling R53 658 380.02. Wow that’s a large sum of money.

The write-off applies to people with a predicted annual income of R9 321 and property values not exceeding R500 000. Only debts that have been outstanding for more than 90 days and confirmed as irrecoverable through an independent assessment are eligible. As the Council clarified, “This write-off does not include debt outstanding for less than 90 days, which is considered recoverable.”

Much of of this debt relates to municipal services such as electricity, water and refuse removal provided to residents. Significant funds intended for service delivery were never recovered.

Why is this happening?

South Africa’s local governments rely on what is called the national “equitable share” to fund basic services and support indigent households. The equitable share is an unconditional transfer from national revenue to provinces and municipalities, ensuring that poorer areas, such as informal settlements, can provide services such as water, electricity, sanitation, and refuse removal. Municipalities also administer indigent support programmes, offering free or subsidised basic services to qualifying low-income households. Well, it is not really free because taxpayers and ratepayers have to cover the bill.

Here is the crux of the matter. When the national equitable share does not fully cover these costs, municipalities must raise the difference through other revenue sources such as property rates and service charges from other residents. For example, if basic services for 5 000 registered indigent households cost R30 million annually, but the equitable share provides only R25 million, the municipality must raise the remaining R5 million locally. Typically this process involves writing off the debt as “irrecoverable” so that the books balance and the municipality can claim to have a clean audit. Sounds like clever book keeping.

Delays or reductions in equitable share payments have occurred. In 2025, the National Treasury withheld allocations from municipalities with unpaid debts, non-compliance with budget regulations, or unreliable indigent registers. Municipalities facing these shortfalls experienced immediate financial pressure.

When it comes to Overstrand and the R53 million, who pays for this shortfall? Residents through sources like property rates and service charges from other residents. To put it bluntly, Overstrand residents are now stuck with R53 million.

The key question that residents in Hermanus, Stanford and other locations should be asking is, how should we respond? This is not a sustainable situation. Also, why should some residents have their rates written off and not others? Sounds like a two-tier system to me. For the Overstrand this is actually something that the DA-led municipality could have prevented. I’ll explore this in the next article.