14 April 2005 Press Release BACKGROUNDER TO MEDIA BRIEFING BY EXEUCTIVE MAYOR ON 14 APRIL 2005: CITY TO EXPLORE SALE OF ITS DEBTORS BOOK The City of Johannesburg (including its utility companies) intends to explore the sale of the portions of its debtors book owned by business and households with high land values through the process of a competitive bidding process. The City's debtors book profile is that the total arrears under consideration at this stage is R5,767 billion; 79% of the arrears is owed by householders and businesses (17%) and almost all the amount (94%) is over 120 days old. Interest constitutes 26% of the debtors book. It makes sense for the City to consider this because it permits the credit control departments to focus their limited resources to ensure current amounts outstanding and selling the book will simultaneously allow the private sector to try its hand in an area where the City has historically had least success. The sale, combined with other elements, can be part of a programme to decisively stengthen the consolidated balance sheet of the city, providing benefits in terms of audit opinions and credit ratings. The proceeds of the sale will be a boost to urgently needed capital expenditure (for electricity, traffic signals and water infrastructure) over the medium term without incurring additional debt. The City is facing considerable challenge in that part of the debt is owed by indigents and other part is owed by low-income people who, although not indigent, are unlikely to be able to afford to pay off the debt however effective credit control might be. In these cases there is a need to re-establish the compact between the customer and the City, with the emphasis on ensuring that all current amounts owing are promptly paid. If the arrears can be used as an incentive to re-establish this compact, then that would also be positive. As part of the process of dealing with the debtors book, the City is also Considering writing off amounts owed by very poor people (conditional on them getting pre-paid meters); Considering gradually writing off amounts owed by a middle category of debtors conditional on the payment of current amounts in full, every month, for 36 months. The Council is to consider this at its monthly meeting to be held next week. ENDS For further information, please contact: Mandy Jean Woods Director: Revenue Marketing and Communications City of Johannesburg Phone: 407 7356 Fax: 403 7738 Cell: 082 553 4211 (send sms if urgent) Email: mandyw@joburg.org.za