South Africa’s municipalities are facing financial doom. According to a study by ratings agency Ratings Afrika, 60% of the country’s municipalities are in financial trouble.
The agency’s Municipal Financial Stability Index, using a mark scored out of 100, measured each municipality’s operating performance, liabilities management, budget practices and liquidity position.
The worst performing municipalities in 2014-15 were Thabazimbi and Madibeng in Brits, which both scored five out of 100, and Matsjhabeng in Welkom with only 8 marks.
Last month, Madibeng’s financial woes resulted in a raid by the Hawks, following claims of corruption. The municipality owes Eskom more than R30 million.
Ratings Afrika said such municipalities spent more than their income, resulting in operating deficits. The quality of their infrastructure was deteriorating because of low spending on repairs and maintenance, threatening their long-term sustainability.
Some municipalities had made good progress, but the overall picture over the past five financial years remained the same, Ratings Afrika found. According to the agency, Tshwane had a liquidity shortfall of R2 billion.
Its operational shortfall had increased from R1.4 billion in the previous financial year to R1.6 billion in 2014-15, and it spent more than its income.
Ratings Afrika said the controversial prepaid smart electricity metering project had done the city more harm than good as its revenue collection rate dropped from 95.5% in to 94.4%.
The top-scoring municipalitiesdid not score more than 80 out of 100. KwaDukuza, in Ballito, and Hessequa, in Riversdale, did the best, both with scores of 78. KwaDukuza had been consistent over the past five periods, while Hessequa showed a lot of improvement.
Well-performing municipalities had entrenched financial policies, budgets based on sound long-term financial strategies, adhered to good budgetary practices, had strict financial control and good revenue collection.