A new survey shows that a majority of the 100 largest municipalities in South Africa are financially unsustainable – and it’s largely due to a failure by political leaders, to govern.
A Municipal Financial Stability Index, published by Ratings Afrika, found that only two provinces in South Africa managed to score higher than 50% for financial sustainability in 2015.
The Western Cape was ranked as the most financially stable province in the country, at 60%, followed by KwaZulu Natal at 59%.
All other provinces scored below 50%, with the worst being the Free State and North West, which scraped only 25% and 26%, respectively.
Ratings Afrika’s index evaluates the operating performance, management of liabilities, budget practices and liquidity position of municipalities, and scores each component out of 100.
Of the 100 municipalities analysed by the group, 60 scored an average under 50% – 42 of which scored under 35%.
The country had an average score of only 43% – a position it has maintained over the past five years, indicating inadequate financial management practices and discipline, which the ratings group pins squarely on the ANC.
SA provincial financial sustainability score (out of 100) – 5 year review
“The political leaders of the municipalities in South Africa, whose responsibility it is to govern, have failed in the majority of municipalities, as reflected by their weak financial sustainability,” the group said.
“The same thread is visible in many state-owned entities such as Eskom, SAA, Post Office, SABC, etc, where financial weakness is largely caused by weak financial governance on behalf of the political leaders and management in charge of these entities.”
“The sad reality is that this weak financial governance is also prevalent in Central Government, which is now threatened with sovereign rating downgrades by the world’s leading rating agencies,” Rating Afrika said.
According to the report, of all South Africa’s major metros, the City of cape Town is the most financially sustainable, with a score of 75%. This is followed by Buffalo City (Eastern Cape) with 73%, and Ekurhuleni (Gauteng) at 70%.
Ironically, Tshwane and City of Joburg (Gauteng) are the worst-run metros, despite being the wealthiest – managing a score of only 24% and 37%, respectively.
“This reflects severe deficiencies in their budgeting practices and financial discipline,” the group said.
SA metros financial sustainability score (out of 100)
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According to Rating Afrika, the expectation is that service delivery and quality of living will deteriorate in the country over the short and medium term.
“The current political leadership in control of the majority of municipalities (the ANC) has demonstrated over the last five years, and more, to not being capable of sound governance.”‘
“This is the main cause of their low financial sustainability,” the group said.
Source: Business Tech