43 collapsed municipalities seek urgent intervention, 151 teetering on brink

While 151 municipalities are teetering on the brink of collapse, 43 have already collapsed and require urgent intervention to rescue them, National Treasury told parliament yesterday.

Senior officials from Treasury painted a bleak picture when they appeared before Parliament’s Standing Committee on Appropriations.

Members of parliament were briefing on local government underspending in respect of the Municipal Revenue Management Improvement Programme, and progress on the implementation of the Integrated Financial Management System.

In a synopsis, Treasury Deputy Director-General for intergovernmental relations, Malijeng Ngqaleni, said local government finances are rising indebtedness and creditors.

Elaborating on the unsavoury state of affairs, local government budget analysis director at Treasury, Sadesh Ramjathan, said of SA’s 257 municipalities, only 58 presented unfunded budgets for the 2022/23 financial year.

“This immediately suggests that 98 municipalities plan to spend more than the revenue they collected, which may include the inability to meet financial obligations,” he said.

“There are 175 municipalities that we’ve identified that are in financial distress and these are municipalities that might be in the brink of a crisis.”

A total of 219 municipalities meet the section 138 and 140 triggers – suggestive of financial problems and eminent crisis with service delivery failures. Above this, 151 municipalities are deemed “bankrupt and insolvent”, and are unable to pay creditors and third parties, include the SA Revenue Service and pension funds.

“The group that will receive attention are the 43 municipalities in crisis, deemed to be beyond the section 154 support and require corrective mode of intervention to rescue them,” Ramjathan said.

“National Treasury is driving this process, in collaboration with the provinces.” He said results of the fourth quarter of the 2021/22 financial year reiterated the dismal state of affairs.

Municipalities are owed R255 billion by customers. “In turn, creditors – which include Eskom and water boards – [are] owed just under R90 billion.

You’d agree that these numbers don’t paint a good picture…” he said At the heart of the failures to collect what is due and pay for services received are “revenue management failures”.

Ramjathan said this has been perpetuated by weak controls. However, Treasury said some progress and achievements have been recorded.

“Economic and financial viability studies were undertaken in North West, Gauteng, Eastern Cape and Northern Cape.

This exercise informed us of the potential revenue that can be derived from potential customers and customer base,” said Ramjathan.