The SA National Treasury on Wednesday told Parliament that 43 Municipalities have collapsed and require urgent intervention to rescue them, while another 151 are teetering on the brink of collapse.
Senior officials from Treasury revealed these details when they appeared before Parliament’s Standing Committee on Appropriations.
In a synopsis, Treasury Deputy Director-General for Intergovernmental Relations, Malijeng Ngqaleni, said local government finances are rising indebtedness and creditors.
Elaborating on the unsavoury state of affairs, Sadesh Ramjathan, Local Government Budget Analysis Director at National Treasury, said out of the country’s 257 municipalities, only 58 presented unfunded budgets for the 2022/23 financial year.
“This immediately suggests that 98 municipalities plan to spend more than the revenue they collected, which may include the inability to meet financial obligations.
“There are 175 municipalities that we’ve identified that are in financial distress and these are municipalities that might be on the brink of a crisis,” he said.
A total of 219 municipalities meet the section 138 and 140 triggers – suggestive of financial problems and eminent crisis with service delivery failures.
Above this, 151 municipalities are deemed “bankrupt and insolvent”, and are unable to pay creditors and third parties, including the South African Revenue Service and pension funds.
“The group that will receive attention are the 43 municipalities in crisis, deemed to be beyond the section 154 support and require corrective mode of intervention to rescue them. National Treasury is driving this process, in collaboration with the provinces,” Ramjathan said.
He said the results of the fourth quarter of the 2021/22 financial year reiterated the dismal state of affairs.
The country’s municipalities, he said, are owed R255 billion by customers. In turn, creditors – which include Eskom and water boards – are owed just under R90 billion.
At the heart of the failures to collect what is due and pay for services received are “revenue management failures”.
These failures, Ramjathan said, are cut across the entire revenue value chain, with both political and administrative leadership unable to enforce the proper implementation of policies and legislation, and encourage the culture of paying for services consumed.
He said this has been perpetuated by weak controls systems.