SA’S MUNICIPAL SECTOR IS ABOUT TO COLLAPSE – RATINGS AFRIKA

By Ciaran Ryan, Moneyweb

Ratings Afrika has been highlighting the dire state of municipal management in SA since it first started publishing its Municipal Financial Sustainability Index (MFSI) in 2011. Never a particularly uplifting read, the latest survey of the 100 largest municipalities in the country is an ice bath.

“The South African municipal sector [except the Western Cape] is about to collapse financially, and it is time for the government to acknowledge it seriously and start taking the necessary steps to save the country from disaster,” says the latest MFSI report, covering the financial year ended June 2021.

The time for tinkering around the edges is past. It’s time for wholesale changes in top municipal management to avert the inevitable calamity, say the authors.

That may be easier said than done, given the financial hole municipalities have dug for themselves at the hands of party cadres. Managers who stand up to corruption are sidelined and harassed.

Residents and businesses are suffering from poor service delivery, and economic growth is strangled in the crib through lack of investment in infrastructure maintenance and development.

That’s a message that started to filter through in the 2021 local government elections, where the ANC for the first time since 1994 won less than 50% of the popular vote, with the Democratic Alliance scoring 20% and the Economic Freedom Fighters 10.6%.

The drop in voter turnout for local government elections from 58% in 2016 to 46% in 2021 points to accelerating voter apathy. The MFSI rates municipalities and metros on a scale of one to 100, based on six financial components: operating performance, liquidity management, debt governance, budget practices, affordability, and infrastructure development.

TOP-SCORING MUNICIPALITIES

The highest-scoring municipality in Gauteng is Midvaal (DA) with a score of 75, followed by Saldanha Bay in the Western Cape (DA) with a score of 72. Senqu (ANC) in the Eastern Cape’s highest-rated municipality with a score of 63. KwaDukuza (ANC) is the top-scoring municipality in KwaZulu-Natal with a score of 66.

What should be concerning to National Treasury is that the top-rated municipality in the Free State (Metsimaholo – Sasolburg) limped home with a score of just 34. North West wasn’t much better: the top-ranked municipality (JB Marks – Potchefstroom) achieved a score of 39.

Scraping the bottom of the rankings are municipalities with weak liquidity, large operating deficits and deteriorating infrastructure as a result of low spending on repairs and maintenance. Lekwa (Standerton) in Mpumalanga barely made any impression at all, with a score of just seven, closely followed by Matjabeng (Welkom) in the Free State with a score of nine. Mangaung (Bloemfontein) is the lowest-scoring metro, with a score of 21.

Western Cape remains the best-run province, with an average score of 52, followed by KwaZulu-Natal (42).

The Free State and North West remain the worst-run provinces, with average scores of 20 and 24 respectively.

What’s concerning is the state of governance at the metro level, which overall recorded a six-point decline from 48 to 42 between 2017 and 2021. Cape Town is the only metro that is considered financially sustainable, with a score of 67, outperforming the rest by a large margin.

“It is clear that the majority of the municipal councils have failed miserably in their governance responsibilities by allowing them to sink into this desperate, unsustainable financial situation,” say the authors.

Another sign of deterioration is the debtors’ collection rate, which fell below an average of 80% from 82.3% a year ago – still well short of the 95% benchmark set by National Treasury. That may seem insignificant in the overall scheme of things, but it shows residents are either unable or unwilling to pay for services, imposing an ever-growing dependence on state grants to cover revenue shortfalls.

It’s possible to right this listing ship, but it’s going to need some brutal changes in management. Nothing else will do it.