For the second year in a row, Drakenstein Municipality is the most financially healthy city in South Africa, a new report by the National Treasury found.
The National Treasury’s State of local government finances and financial management report, released the past week, found that most municipalities were in “reasonably good shape” – but that 125 (out of 257) municipalities were in “varying degrees of financial distress”.
“A significant number of municipalities continue to perform poorly and remain a cause for concern. This contributes to anegative impression of the performance of the municipal system as a whole. ”
The report evaluated finances of the country’s municipalities according to a set of criteria which included cash as a percentage of operating expenditure, the persistence of negative cash balances, and the degree of overspending of original operating budgets.
It found that the eight most financially healthy cities, out of the country’s 27 cities, in South Africa are:
- Drakenstein Municipality (Western Cape) (first place)
- Steve Tshwete Municipality (Mpumalanga) (second place)
- George Municipality (Western Cape) (tied third place)
- Emalahleni Municipality (Mpumalanga) (tied third place)
- Nelson Mandela Bay (Eastern Cape) (tied fifth place)
- Ekurhuleni Metro (Gauteng) (tied fifth place)
- uMhlathuze (KwaZulu-Natal) (tied fifth place)
- Tlokwe-Ventersdorp (North-West) (tied fifth place)
The report found that in total, municipalities underspent their capital budgets by R16.3 billion, or 22.9% of the R71.1 billion accumulative municipal capital budget.
Of the R16.3 billion, metropolitan municipalities accounted for 13.2% of all capital budget underspending.
The National Treasury said the number of municipalities that have underspent on their capital budget by more than 30% increased from 67 in 2016/17 to 92 in 2017/18.
In total, the number of municipalities adopting budgets which were able to be funded by the municipality itself decreased from 169 in 2013/14 to 2018/19 in 134 – a decline of 20.7%.
Treasury said the root causes for defaulting municipalities typically are unrealistic budgeted revenue collection levels, inadequate budget allocation for repairs and maintenance, and inadequate human resources capacity and a shortage of technical skills.