Ratings Afrika says five out of the 112 municipalities in the country are financially sustainable.
The agency says the poor results are due to multiple factors such as corruption and mismanagement.
The agency says about 60% of these municipalities run huge budget deficits and are on the verge of becoming dysfunctional due to the excessive loss, currently sitting at over R60 billion.
Ratings Afrika says four local municipalities in the Western Cape are financially sustainable, with only one in Gauteng making it to the top five municipalities that have proper budgets and are not running at a deficit.
It says Cape Town has been the highest scoring metro for the past six years.
The agency says the benchmark for a sound municipality is 95. However, many of the country’s metros average 40.
The agency’s analyst Leon Claassen says Mangaung and Tshwane are one of the two metros facing serious financial challenges with a score of 24, meaning these metros operate at a loss.
Claassen says the City of Tshwane is in big trouble and something urgent needs to be done before it’s too late.
“It’s actually very, very concerning because the metros are supposed to be the drivers of the economy, that’s where that’s where most of the economic activity takes place. It’s in the metros and if they do not function it has an effect economically on the whole country, something has to be done. Now when we look at Tshwane and Mangaung, why are they bad, they realise operating deficit. Mangaung at almost R2 billion a year, that’s just in 2022, Tshwane at R4.2 billion loss in 2022. The liquidity shortfalls are shocking, R1 billion for Mangaung and almost R7 billion for Tshwane, so Tshwane is in big trouble unfortunately that’s a fact.”
At the same time, Midvaal Mayor Peter Teixeira says to be part of the best performing municipalities in the country requires working for the people.
“I think in the main we all know the corruption and everything that is taking place amongst other municipalities, I think we saw the reports here today and I think for Midvaal we continue to do what we’re supposed to be doing and that is to serve our people.”
Ratings Afrika says the unfortunate reality since the inception of the index in 2011, is that the municipalities operating deficit keeps getting bigger each year.