How municipalities spend every R100 of your tax money in South Africa

Stats SA has published its financial census of municipalities for 2023, showing how much money they collected from South African residents and what they spent it on.

Stats SA noted that 99% of municipalities responded for the 2023 financial year per province, with the expectation being Ditsobotla local municipality in the North West.

According to the data, Municipal revenue climbed by 8.9% from R585 billion in 2022 to R637 billion in 2023.

The report stated that the largest source of total municipal revenue, amounting to R517 billion for the year ending 30 June 2023, was from government transfers and subsidies (27.7%).

This was followed by revenue from electricity sales (25.6%), property rates received (16.6%), and other revenue (12.7%), which includes income from fines, penalties, forfeits, licenses, permits, and other transfers and subsidies.

Additionally, revenue from sales of water accounted for 10.5%, while refuse removal charges contributed 2.7% and sewerage and sanitation charges contributed 4.3%.

According to the report, the municipalities’ expenditure matched their revenue despite the 8.9% increase, meaning they spent everything they received.

According to Stats SA, employee-related costs (26.4%) were the largest contributor to municipal total operating expenditures of R505 billion (total expenditure less surplus).

This was followed by purchases of electricity (22.6%), debt impairment (10.9%), contracted services (9.5%), depreciation, amortisation, and impairment (8.2%), other operational costs (7.5%) – including travel and subsistence, external audit fees, bank charges, facility and card fees, communication, wet fuel, hire charges, insurance underwriting, etc. – and purchases of water (5.8%).

The smallest contributors were councillor remuneration (0.9%), transfers and subsidies (1.1%), inventory consumed (1.9%), other expenditures (2.1%) – encompassing loss on disposal of assets, operating leases, etc. – and finance costs (3.2%).

Stats SA mentioned that the sum of percentages might not add up to 100% due to the rounding-off of figures.

This means that every R100 note paid through rates and taxes goes to:

• R26.40 goes to employee costs,
• R22.60 to electricity,
• R10.90 to debt,
• R9.50 to contractors,
• R8.20 to account for depreciation, amortisation, and impairment of municipal assets,
• R7.50 to ‘other operational costs’,
• R5.80 to water, and
• The other R9.90 goes to other minor financial expenditures.

Despite this expenditure, South Africans seem to not be benefitting, as many turn to the private sector to fund basic services.

According to recent data from Stats SA, the number of South Africans using government services has significantly dropped.

This decline has been linked to limited access to these services, a lack of trust in state-run institutions, and individual encounters with corruption, which have undermined the credibility of the government.

After analysing the report, PwC, a financial services firm, concluded that the decrease reflects an ongoing deterioration in the quality of public services.

Corruption and inefficiency have weakened the state’s capabilities, prompting citizens to turn to private alternatives.

Furthermore, the country’s public sector is grappling with mounting pressure due to dwindling financial support and resources, making it increasingly challenging to deliver the same quantity and quality of services as before.

The latest figures highlight a drop in the use of public transportation services from over 43% in 2019/20 to 37.5% in 2022/23.

Similarly, the utilization of public clinics decreased from 35.4% to 31.7% during the same period.

In contrast, services such as courts (2.4%), public housing services (2.4%), and correctional services (0.5%) were among the least used in 2022/23.

The graph below depicts the concerning decline in the utilization of government services, based on Stats SA’s findings.

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