South Africa’s metropolitan municipalities are lacking quality credit control and revenue management, a report by the Parliamentary Budget Office has shown.
Approximately 75% of the total debt owed to the metros was outstanding for more than 90 days up until 30 June 2016. This comes after metropolitan municipalities were owed close to R65bn in outstanding debt as at the end of 2015.
Johannesburg and Tshwane’s ability to pay short-term obligations is questionable.
The current assets to current liability ratios of these two municipalities, which measure the ability to pay back short-term liabilities with short-term assets, were below 1, while the expected range for this ratio is supposed to be between 1.5 and 2.1.
Johannesburg and Tshwane would therefore be unable to pay all their current short-term obligations if they fall due at any specific point, the Budget Office said.
The report further showed that metros have in the past financial year spent their budgets within the normal range of 25% and 40%. However, if the spending ratio exceeds the norm, it could mean there could be inefficiencies with spending, over-staffing and misdirected spending.
Ekurhuleni, eThekwini and Tshwane were fingered for over-spending on personnel costs. Tshwane’s over-spending on staff was 4.5%, although the metro had 9,492 vacancies.
Johannesburg spent 96.5% of its adjusted budget on staff costs, which leaves little room to fill the 6,769 vacant positions.
The preliminary figures provided by the Parliamentary Budget Office further showed that Cape Town, Johannesburg and Mangaung have funded more than 50% of their capital expenditure.
In the period under review, metros spent altogether R34.95 billion capital, which represents close to 86% of the 2015/16 adjusted budget.
The Parliamentary Budget Office was briefing MPs ahead of Finance Minister Pravin Gordhan’s mini budget, which will be read in a week’s time on October 26 2016.