Report warns Johannesburg faces a fiscal doom loop
Semafor Signals says Johannesburg is cash-starved as unpaid bills rise and revenues are booked as if invoices were paid. The report cites a “doom loop” of defaults, rate hikes and non-payment, plus >9% annual wage-cost growth.
The city is “living off a fiscal fiction,” said the Centre for Development and Enterprise think tank.
Johannesburg’s finances are collapsing under the weight of unpaid bills, leaving South Africa’s economic hub cash-starved and politically rudderless, according to a new report.
The city is “ living off a fiscal fiction,” said the Centre for Development and Enterprise think tank, booking revenues as if invoices had been paid, when collections lag far behind.
Unpaid bills have surged, the report said, trapping the city in a financial “doom loop”: As defaults rise, the city hikes rates on paying customers, who in turn stop paying.
Meanwhile, wage increases have seen employment costs grow by more than 9% per year over the past decade.
Infrastructure spending has also halved in real terms, leading to widespread water leaks and potholed roads.
The report comes ahead of South Africa’s local government elections in November.
The vote in Johannesburg, a city that generates 16% of South Africa’s $400 billion-plus GDP and is home to Africa’s highest concentration of corporate headquarters, is the central battleground of the nationwide polls.