Ratings Afrika has published its latest Municipal Financial Sustainability Index, reveal-ing the best and worst municipalities in South Africa, of which Gamagara municipality has been named the worse performing municipality in the Northern Cape province.
The ratings agency's report asses-ses the financial positions of the country's 100 largest municipalities and rates them according to their re-spective financial performances in the latest financial year.
It comes after parliament recently accounced that just 10 defaulting municipalities owed Eskom almost R10-billion - led by the Maluti A Pho-fung municipality in the Free State owing R2.8-billion.
The report evaluates the operating performance, liability management, budget practices and liquidity posi-tion of each municipality and then scores them out of 100.
Worryingly, the latest index has delivered a “shocking” revelation in 2018, noting that a large portion of South Africa's biggest municipalities are in serious financial trouble – to the extent that they would need a R22.4-billion government bail out to
become financially stable again.
“The problems start mainly with in-adequate budget planning and lack of financial discipline that cause these municipalities' expenses to exceed their income, resulting in op-erating losses,” Ratings Afrika said. “These losses, coupled with low re-venue collection ratios cause their current liabilities to exceed their cur-rent assets.”
Only 22 municipalities out of 100 reported operating surpluses, with the remaining 78 reporting deficits.
medium term,” Ratings Afri-ka said.
“The municipal sector is currently in a bad financial state. Correction will require decisive political leader-ship that looks after the interests of residents rather than its own. The current leadership in control of the majority of municipalities has de-monstrated over the last five years and more, not being capable of sound governance.
“This is the main cause of the de-teriorating financial sustainability of the municipal sector in South Africa,” it said.
The combined profits of those with a surplus amount to only R1-billion, whereas the combined los-ses amount to R15.3-bil-lion, the group said.
In the Northern Cape pro-vince, according to the Ra-tings Afrika's report, Gama-gara is the worst performing municipality.
“Given that the financial sustainability of the key lo-cal municipalities in South Africa is weak, our expect-ation is that the quality of service delivery is likely to deteriorate over the short to
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