Municipal services

South Africans do not pay for municipal services

The National Treasury released the report on local government revenue and expenditure for the third quarter of fiscal year 2020/21, highlighting an escalation in municipal consumer debt.

This report covers performance against adjusted local government budgets for the third quarter of the municipal fiscal year ending March 2021 and includes spending against conditional grant allocations for the same period.

Overall, the municipalities spent 65.3% or 322.9 billion rand of the total adjusted expenditure budget of 494.5 billion rand. Aggregate invoicing and other income amounted to 73.5% or R358.6 billion of the total adjusted revenue budget of R488 billion.

Capital expenditure amounts to R34.6 billion or 48.9% of the adjusted capital budget of R70.8 billion.

Total cumulative expenditure since the start of the year for metros stands at R185.1 billion, or 66.5% of their adjusted expenditure budget of R278.4 billion. The lowest spending is reported by eThekwini at 58.8%, according to the report.

When billed revenues are measured against their adjusted budgets, metro performance reflects a deficit on water services for the third quarter of fiscal year 2020/21. This comparison excludes secondary costs incurred or actual income received:

  • Water revenues billed amounted to R18.7 billion against an expenditure of R20.3 billion (deficit);
  • Charged revenues from energy sources totaled 58.3 billion rand compared to an expenditure of 52.3 billion rand (surplus);
  • Revenues billed from wastewater management totaled 5.4 billion rand against an expenditure of 5.2 billion rand (surplus), and
  • Revenue billed from waste management totaled R8 billion against an expenditure of R6.6 billion (surplus).

Aggregate billed revenue for secondary cities is 88.8% or R60.6 billion of their total adjusted revenue budget of R68.2 billion for fiscal year 2020/21.

The performance against the budget adopted for the four basic services for the secondary cities for the third quarter of 2020/21 also shows surpluses compared to the invoiced revenues without taking into account the secondary costs incurred or the actual revenues collected:

  • Water revenues billed amounted to R 9.1 billion against an expenditure of R 7.9 billion;
  • Electricity revenue billed totaled R20.9 billion against an expenditure of R19.1 billion;
  • Revenues billed for wastewater management totaled R 3.1 billion against an expenditure of R 2.3 billion; and
  • Revenue billed from waste management totaled R 2.7 billion compared to an expenditure of R 1.9 billion.

Capital expenditure levels average 62.5% or 4.9 billion rand of the adjusted capital budget of 7.8 billion rand.

“It should be noted that low and sustained investment spending has potentially serious implications for the government’s ability to meet the goals of expanding access to water, sanitation, electricity and electricity. housing, as well as job creation, ”the Treasury said.

Aggregate municipal consumer debt stood at Rand 230.7 billion, up from Rand 230.5 billion reported in the second quarter of 2020/21. A total of R73.7 billion was written off as bad debts.

The government accounts for 6.7% or 15.5 billion rand (20.7 billion rand reported in the second quarter of 2020/21) of total unpaid debtors.

Growing debt

As in previous years, households still represent the largest component of debt to municipalities at 72.5% or 167.3 billion rand – 72.2% or 166.5 billion rand in the second quarter of the year. current exercise.

The Treasury pointed out that all of the outstanding debt of R 230.7 billion is not realistically collectible, as these amounts include debts older than 90 days, interest on arrears and other collections.

If consumer debt is limited to less than 90 days, the actual amount to be collected is estimated at R36.5 billion, he said.

Metropolitan municipalities owe R115.4 billion, up from R111.2 billion in Q2 20/21. Households in metropolitan areas are believed to account for R84.2 billion or 73% of outstanding debt, followed by businesses which account for R25.6 billion or 22.2% and the debt of state bodies to. 5.0 billion rand or 4.4% of the total outstanding debt owed to the subways.

For secondary cities, R46.8.4 billion was reported as outstanding consumer debt. The majority of debt is owed by households for an amount of R35.9 billion or 76.75 of the total outstanding debt. An amount of 41.7 billion rand or 89% has been outstanding for more than 90 days.

Municipalities owed their creditors 65.5 billion rand as of March 31, 2021, down 1.7 billion rand from the 67.3 billion rand reported in the second quarter of 2020/21.

“Creditors over 30 days past due on electricity and bulk water, trade creditors and loan repayments are of concern,” the Treasury said.

He noted that Free State municipalities have the most unpaid creditors over 90 days at R15.4 billion, followed by Mpumalanga at R12.3 billion and Gauteng at R6.6 billion. .

The total loan balance for all municipalities stands at R68.3 billion as of March 31, 2021.

This includes long-term loans of R48.6 billion, long-term marketable bonds of R10.7 billion and long-term non-marketable bonds of R5.9 billion. The balance represents other short and long term financing instruments.

The report is prepared using the figures from the data strings of the Municipal Standard Chart of Accounts (mSCOA).

However, the Treasury expressed concern about the credibility of the information contained in the mSCOA data strings, citing incorrect use of mSCOA and municipal accounting practices by municipalities.

A large number of municipalities do not budget, transact, and report directly into or from their core financial systems, he said. Instead, they prepare their budgets and reports on an Excel spreadsheet and then import the Excel spreadsheets into the system.

“Often, this manipulation of data results in unauthorized, irregular, fruitful and unnecessary (UIFW) spending as well as fraud and corruption, because the controls built into core financial systems are not triggered and transactions should not be triggered. to do. “

The Treasury said municipalities are not locking their adopted budgets or financial systems at the end of the month to ensure prudent financial management.

Read: South Africans take longer to repay government debt each year

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