Johannesburg is facing a worsening financial crisis as rising unpaid bills, higher operating costs, declining infrastructure investment, and mounting debts to suppliers threaten to push the country’s economic hub into a “municipal doom loop”, according to a new report by the Centre for Development and Enterprise (CDE), a think tank based in the city.

The report, Joburg’s Broken Budget, was released this week, and is the second in a series of studies of the state of Johannesburg.

CDE executive director Ann Bernstein said the city’s financial problems went beyond an annual budget deficit and reflected a growing disconnect between the revenue Johannesburg records and the cash it actually collects.

“Johannesburg’s financial crisis is much more serious than an annual budget deficit,” Bernstein said, “The city has become dangerously disconnected from financial reality.”

The city reports that in 2024/25 customers owed it R12-billion. However, this does not take into account provisions for bad debt. If that is taken into account then the amount of unpaid bills owed to the city was over R70-billion.

This amount has also increased steadily: gross unpaid bills owed to the city grew from about R15-billion in 2014/15 to around R72-billion in 2024/25, an increase of almost 17% a year over the decade.

The chart below shows the scale of the debt owed to Johannesburg.

By 2024/25, the annual increase in unpaid debt was equivalent to about one rand for every six rand the city billed customers for rates and services, the report says.

At the same time, infrastructure investment has fallen sharply. In inflation-adjusted terms, investment has declined by about 50% since 2014/15, and by almost 70% on a per-resident basis.

Employee-related costs, meanwhile, increased from R8.6-billion to R20.7-billion over the same period, an annual increase of around 9%. These costs now consume roughly 40% of the cash collected from customers, according to the report.

The city’s financial pressures have also been reflected in its relationship with suppliers. Unpaid debts to suppliers, including Eskom and Rand Water, exceeded R28-billion by June 2025, compared with R12-billion a decade earlier.

The financial deterioration is taking place against a weak economic backdrop. Johannesburg’s economy has grown by only about 1% a year in real terms over the past decade. Between 2015 and 2025, the city’s working-age population increased by more than 760 000, while employment increased by only about 30 000.

“A city cannot indefinitely increase the cost of poor and declining services for an economy that is barely growing,” Bernstein added. “Johannesburg increasingly expects a shrinking group of compliant households and businesses to carry an ever-larger financial burden. And this in a context in which infrastructural deterioration is undermining the prospects for growth.”

The chart below shows how the growth in Johannesburg’s spending has outstripped the rate of economic growth in the city.

The city is now in a proverbial “doom loop”, in which deteriorating services contribute to declining willingness or ability to pay, prompting higher tariffs and rates for customers who do pay. Falling revenue then limits maintenance and investment, further weakening the ability to supply services.

The reports notes that given the stalled economy, any municipality has four options: it can extract a greater share of income from those who pay; rely more heavily on national transfers; borrow more; or not pay some of its bills. Johannesburg, it argues, has pursued each of these strategies.

Johannesburg is also under pressure with falling receipts for water and electricity, with growing problems of reliability in their supply.

“Johannesburg can survive potholes and poor refuse collection for a while. It cannot survive without reliable water,” Bernstein commented. “Households need water, firms need reliable supplies of water. The deterioration of the water system is an existential threat to the city.”

The CDE said Johannesburg had increasingly responded to its cash-flow problems by delaying payments to suppliers, effectively requiring them to finance the city’s operations.

It also warned that lenders were becoming more cautious. The French development finance agency AFD recently declined to extend a R2.5-billion loan to Johannesburg, citing governance concerns.

“Fiscal fiction” was increasingly exposed and impossible to avoid confronting.

Dealing with this would be difficult, Bernstein warned: “There is no solution without pain. Johannesburg must dramatically improve collections while protecting indigent households. It must restrain employee and contractor costs, expand infrastructure spending, reduce supplier arrears, and rebuild confidence in the accuracy of its billing and financial management.”

National government may ultimately have to provide financial support, but Bernstein warned against an unconditional bailout.

“Johannesburg is too important to the country to be allowed to collapse,” Bernstein said. “But national government must not write a cheque that allows the same political and financial practices to continue.”