Municipalities under financial strain, says Ratings Afrika report

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Municipalities across the country are facing challenges of weak financial sustainability, according to a report by Ratings Africa.

The report by Rating Afrika, which specialises in assessing the soundness of governance in various entities, including municipalities, highlights the precarious financial situation of many local governments.

With poor service delivery affecting a significant portion of South Africans, and some municipalities nearing dysfunctionality, the report evaluated 112 municipalities for the 2023 fiscal year.

Ratings were based on factors such as operating performance, liquidity, borrowing practices, budgeting, affordability of rates and tariffs, and infrastructure investment.

According to the agency, insufficient funding for maintenance and repairs is causing infrastructure to deteriorate rapidly. Only municipalities in the Western Cape and Midvaal were found to have sufficient financial sustainability.

Analyst at Ratings Afrika, Leon Claassen says, “The top scoring municipalities normally have good governance by the councillors of the municipality, they have good long term financial plans and strategies, their budget practices are very good, they have good financial discipline, they have high revenue collection rates of about 95%.”

He adds, “And almost the opposite for those municipalities that are scoring really bad, the governance is not very good, there is interference by politicians in terms of the work that the managers and officials do at the municipality.”

South Africa comprises 257 metropolitan, district, and local municipalities, including 8 metropolitan, 44 districts, and 205 local municipalities.

Ratings Afrika | Financial woes at SA’s municipalities