Government departments and the Ingonyama Trust owe the eThekwini municipality more than R500-million in unpaid rates, and the city has appointed a team of forensic experts to investigate and recover the outstanding debt.
Government debt makes up 35 percent of the municipality's total debt and city officials are concerned that this will encourage a culture of non-payment among Durban ratepayers.
The departments of public works, both national and provincial, have been identified as the worst offenders because they are responsible for paying rates for all other government departments.
The provincial department of housing has been identified as another defaulting department.
It is also the responsibility of the department of public works to pay rates of properties belonging to the Ingonyama Trust.
The trust was established on the eve of the 1994 elections to protect all of the land belonging to the former KwaZulu homeland.
City treasurer Krish Kumar attributed the non-payment of council rates to problems of ownership of certain government properties. He said some government properties had not been allocated to any department.
The situation is so serious that the city responded by appointing a team of experts in November last year to work on recovering the outstanding debt.
Kumar said the non-payment of debt had a negative impact in the provision of services by the municipality.
However, his optimism has been boosted by the fact that his department has recently seen a steady flow of payments and some queries have been resolved.
"Government departments are responsible for a large percentage of our debt, which is why we decided to focus on these funds.
"The team has managed to collect R108-million so far, R100-million from public works and R8-million from the department of housing."
He added that meetings were being held with various government departments to ensure that progress was made in terms of payments.
The deadline for sorting out all of the accounts was December 2005.
Kumar said debt collection was a long process, in which government departments had to verify whether properties belonged to their respective departments before payments were made.
"Sometimes the process involves field work carried out by inspectors, but we believe that by the end of this year the exercise will be finalised," he said.
The council is also toying with the idea of introducing a new revenue system, whereby all accounts will be consolidated and ratepayers will be presented with one account.
It is hoped that this process will reduce reliance on recovering rates from debtors through sale of execution and put more emphasis on disconnection.
It has also emerged that several government departments owe the municipality millions of rands in unpaid water accounts, and the city is looking at ways to deal with the huge outstanding debt, while cultivating the culture of payment.
However, the city has refused to name the defaulting departments, saying this could jeopardise the negotiations that are already at an advanced stage.
When contacted for comment, Harry Mchunu, spokesperson for the office of KwaZulu-Natal Premier S'bu Ndebele, said he was unable to issue a blanket statement on the matter because "we don't know the circumstances of individual departments".
His counterpart at the provincial department of public works, Bongani Ngubane, said the department was investigating the claims.
He added that the investigation would reveal whether it was the national or provincial department that owed the municipality outstanding rates.