A Buffalo City Metro decision more than two years ago to move its debt collection in-house has failed, and unpaid debts are piling up into a mountain of debt estimated at R1.7-billion.
BCM claims that lawyers in their legal department are on top of about 27000 cases of defaulters, which were returned by three legal firms in sealed boxes to the BCM debt management building at 5 Commercial Road in May 2014.
However, on June 29 council was asked and, although it raised concerns over the accuracy, accepted a request from finance officials to write off R103-million in debt from rates and services’ defaulters up to September last year.
The Daily Dispatch went to the debt department and found a large, new building still in a state of refurbishment with many empty offices.
One official, who would not give her name, confirmed there were boxes of files in the building that were “too old” to be recoverable.
However, general manager of revenue Leon van Wyk denied there were any boxes and ordered Daily Dispatch to leave the building.
BCM CFO Vincent Pillay threatened to have the reporter “put behind bars” for getting into the building.
He said via an e-mail from metro spokesman Sibusiso Cindi that the returned lawyers’ files “have been reviewed and applicable debt collection action commenced”.
He refused to give more details except to say old files had been “archived” and that any write-offs (debts deemed, after some effort to collect, to be unrecoverable) were approved by council.
“Each case is reviewed on its own merit and applicable debt collection action commences as outlined in the credit control by-law,” he said.
“Cases where debt was subjected to debt collection action and action did not yield the desired results, are submitted to council for approval to write off as is applied in any institution.”
He claimed only the ground floor of the new building was empty and would be occupied within days.
Answering further questions, BCM acting municipal manager Nceba Ncunyana insisted that 180-day-old debt was “subjected to debt collection actions such as disconnection, blocking and legal collection action”.
Once debts are past 30 days, “collection action commences with telephone calls, pre-termination notices, disconnection of electricity, blocking of electricity and then legal action”.
But the story from the legal fraternity, and DA opposition councillors past and present on the BCM finance standing committee, contradict the CFO’s claim that all is well with debt collection.
A veteran on the committee, Chantal King, who is the DA councillor for Parkside, said the truth was that BCM’s attorneys were not focusing on debt but on other internal matters, and had no debt secretaries or support staff to cope with 26058 debtors listed in the June 15 council documents set down to be “written off” for the period running up to September 30 last year.
The amount to be abandoned for collection was R103-million.
King, a former accountancy teacher and BCom graduate, said the lack of an active collection division meant BCM was writing off any debt not paid after 120 days.
“The officials claim to have tried legal action, but we know they don’t have debt secretaries and their legal department is slow.”
Auditor and former BCM finance official Geoff Walton, who is joining the finance committee as a DA councillor, said claims of a 90% debt collection rate only went to 120 days, and after that it plunged to 7%.
The total money owed to BCM on June 30 is R1.7-billion, of which the largest category of debtors, “households” (residents) is at R1.04-billion, while businesses owe R367-million, and government R42-million.
King said BCM’s collection department was struggling to load a new debt management software programme.
Residents were wise to the calamity in the metro’s debt collection system and were adopting a range of illegal tricks to keep on getting services for free.
“Some businesses change their names and open up as new businesses, others are finding a way to bypass their electricity meters which stay at zero, others ignore their bill or change their names. The word is out that there is no real collection.
“The losses are starting to increase,” she said. “I have been told that Vincent is being bullied into covering up the big truth. But I am not fooled.”
Trish Williams, a DA councillor, member of the finance committee until recently, and a debt collector by profession, said: “I worked in the BCM finance department until 2012. Those attorneys were doing well.”
As a DA councillor since 2013, she had raised the lack of debt collection repeatedly.
“They don’t have the computer programme to manage collection. A tender went out but the company did not install half the programme.”
“For two years there has been no debt collection. There is nobody in-house sitting and phoning and I know all the staff. When you write off millions every quarter, then there is no internal debt collection.
“I go and visit staff and nobody is sitting with files open or phoning and sending letters of demand because they do not have the system.
“If it continues like this, BCM will go under. Revenue is at the heart.” — mikel@dispatch.co.za
BCM fails to collect debt of R1.7bn
BCM claims that lawyers in their legal department are on top of about 27000 cases of defaulters, which were returned by three legal firms in sealed boxes to the BCM debt management building at 5 Commercial Road in May 2014.
However, on June 29 council was asked and, although it raised concerns over the accuracy, accepted a request from finance officials to write off R103-million in debt from rates and services’ defaulters up to September last year.
The Daily Dispatch went to the debt department and found a large, new building still in a state of refurbishment with many empty offices.
One official, who would not give her name, confirmed there were boxes of files in the building that were “too old” to be recoverable.
However, general manager of revenue Leon van Wyk denied there were any boxes and ordered Daily Dispatch to leave the building.
BCM CFO Vincent Pillay threatened to have the reporter “put behind bars” for getting into the building.
He said via an e-mail from metro spokesman Sibusiso Cindi that the returned lawyers’ files “have been reviewed and applicable debt collection action commenced”.
He refused to give more details except to say old files had been “archived” and that any write-offs (debts deemed, after some effort to collect, to be unrecoverable) were approved by council.
“Each case is reviewed on its own merit and applicable debt collection action commences as outlined in the credit control by-law,” he said.
“Cases where debt was subjected to debt collection action and action did not yield the desired results, are submitted to council for approval to write off as is applied in any institution.”
He claimed only the ground floor of the new building was empty and would be occupied within days.
Answering further questions, BCM acting municipal manager Nceba Ncunyana insisted that 180-day-old debt was “subjected to debt collection actions such as disconnection, blocking and legal collection action”.
Once debts are past 30 days, “collection action commences with telephone calls, pre-termination notices, disconnection of electricity, blocking of electricity and then legal action”.
But the story from the legal fraternity, and DA opposition councillors past and present on the BCM finance standing committee, contradict the CFO’s claim that all is well with debt collection.
A veteran on the committee, Chantal King, who is the DA councillor for Parkside, said the truth was that BCM’s attorneys were not focusing on debt but on other internal matters, and had no debt secretaries or support staff to cope with 26058 debtors listed in the June 15 council documents set down to be “written off” for the period running up to September 30 last year.
The amount to be abandoned for collection was R103-million.
King, a former accountancy teacher and BCom graduate, said the lack of an active collection division meant BCM was writing off any debt not paid after 120 days.
“The officials claim to have tried legal action, but we know they don’t have debt secretaries and their legal department is slow.”
Auditor and former BCM finance official Geoff Walton, who is joining the finance committee as a DA councillor, said claims of a 90% debt collection rate only went to 120 days, and after that it plunged to 7%.
The total money owed to BCM on June 30 is R1.7-billion, of which the largest category of debtors, “households” (residents) is at R1.04-billion, while businesses owe R367-million, and government R42-million.
King said BCM’s collection department was struggling to load a new debt management software programme.
Residents were wise to the calamity in the metro’s debt collection system and were adopting a range of illegal tricks to keep on getting services for free.
“Some businesses change their names and open up as new businesses, others are finding a way to bypass their electricity meters which stay at zero, others ignore their bill or change their names. The word is out that there is no real collection.
“The losses are starting to increase,” she said. “I have been told that Vincent is being bullied into covering up the big truth. But I am not fooled.”
Trish Williams, a DA councillor, member of the finance committee until recently, and a debt collector by profession, said: “I worked in the BCM finance department until 2012. Those attorneys were doing well.”
As a DA councillor since 2013, she had raised the lack of debt collection repeatedly.
“They don’t have the computer programme to manage collection. A tender went out but the company did not install half the programme.”
“For two years there has been no debt collection. There is nobody in-house sitting and phoning and I know all the staff. When you write off millions every quarter, then there is no internal debt collection.
“I go and visit staff and nobody is sitting with files open or phoning and sending letters of demand because they do not have the system.
“If it continues like this, BCM will go under. Revenue is at the heart.” — mikel@dispatch.co.za
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