Report municipalities in financial mess the messenger electricity usage calculator south africa


A new damning report on dysfunctional local government in South Africa warns that many municipalities are in financial distress. The report: ‘The state of local government finances and financial management as at 30 June 2017′ was released by the Treasury, Monday.

“The conclusion of the assessment is that municipalities in financial distress are characterised by poor cash flow management and an increase in outstanding debtors and creditors based on the assessment of the following financial health indicators:

• 64 municipalities had negative cash balances at 30 June 2017. Throughout the 2016/17 financial year, none of the metropolitan municipalities (metros) recorded negative cash balances. This is a strong indication that, in general, they have a solid cash base and comply with cash flow management procedures.

• At an aggregate level, 74 (68 in 2015/2016) municipalities in 2016/17 (28.8 per cent) recorded cash coverage exceeding three months of operational expenditure, which is within the acceptable norm. Of concern is the fact that the number of municipalities with cash coverage of less than one month of operational expenditure increased from 116 in 2015/16 to 137 in 2016/17.

• At the end of the fourth quarter of 2016/17 (as per the Section 71 results), total debtors amounted to R128.5 billion, a R14.9 billion increase from the 2015/16 financial year and total creditors amounted to R43.8 billion, a R4.9 billion increase from the 2015/16 financial year.

• In 2016/17, 17 district municipalities were identified as financially distressed, an increase from the 16 of the previous year. It is cause for concern that district municipalities are financially distressed, given the role they have to play in empowering and capacitating local municipalities.”

“Recorded water and electricity losses remain high. There is on-going instability in senior municipal management positions with an increase in the number of acting Municipal Managers (104) and acting Chief Financial officers (88), a total increase in both acting positions from 18 to 20 per cent has a negative impact on service delivery to communities.

• The provision for refuse removal services remains a challenge, especially in rural areas. 201 municipalities reported on the provision of refuse removal, 39 (19.4 per cent) were able to serve 80 per cent or more of their households with refuse removal services on a weekly or less often than a weekly basis.

• 66 municipalities (23.7 per cent of all municipalities) collected less than 80 per cent of the revenue owed to them as per their adjustments budgets. Municipalities are especially struggling in the Eastern Cape, Northern Cape and Limpopo Provinces.

• Challenges are mainly still experienced across the infrastructure development life cycle in municipalities from project identification, infrastructure planning, financing, construction to operations and maintenance. Some of the root causes remain weak institutional capacity and shortage of skills that all impact on the ability to plan for operations and maintenance of infrastructure.