How SA municipalities make money

Municipal income for the financial year ended June 2015 climbed to R309 billion, up from R283,5 billion in 2014, according to new data from StatsSA.

The latest municipal financial report showed however, that South African municipalities are more in debt than they were in the previous financial year – with a quarter of all expenses going to salaries.

Municipal liabilities (money owed to service providers, et al) have increased to R196.8 billion, up 11.6% from 2014’s total of R176.4 billion.

The provinces which showed the highest percentage increases between 2014 and 2015 were Free State (40.4%), North West (18.3%), Gauteng (17.2%) and Mpumalanga (13.9%).

The provinces which contributed least to the increase in total liabilities between 2014 and 2015 were KwaZulu-Natal (0.5%), Western Cape (3.9%), Eastern Cape (5.6%) and Limpopo (6.6%).

Liabilities

Despite the increase in municipal liabilities, the country has managed to keep its debt to income ratio at 0.6:1. Municipal income for 2015 amounted to R309 billion.

StatsSA2Looking at municipal expenditure, the biggest operational cost to municipalities is paying employees, which accounts for 25.6% of all expenses. The next biggest cost is electricity, which accounts for 21.7%.

Employee costs increased by R4.4 billion between 2014 and 2015 to R73 billion – the single biggest cost increase of all expenses.

Expenditure

Earlier in June, Auditor-general Kimi Makwetu said that irregular expenditure among South Africa’s municipalities more than doubled over the last five years, to R14.75 billion.

The reason for the increase in irregular expenditure, according to Makwetu, is continued non-compliance with SCM legislation, but also an improvement in the ability of municipalities to detect and disclose current and prior year irregular expenditure in their financial statements.

In 2010-11, 73% of the irregular expenditure was identified during the audit, while in  2014-15 municipalities identified 69% of the irregular expenditure – some using consultants to determine the full extent of irregular expenditure.

Municipalities in North West, Mpumalanga, Eastern Cape and Limpopo were the main contributors to the significant increase in irregular expenditure over the past five years, the AG said.

Fruitless and wasteful expenditure in 2014-15 was more than R1 billion higher than in 2010-11 at R1.34 billion, and was  again incurred by an increasing number of municipalities.

Unauthorised expenditure also increased threefold from 2010-11 to R15.32 billion in 2014-15.

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How SA municipalities make money