The fourth quarter local government budget statement was released today by the National Treasury. The statement covers revenues and expenditure for the twelve months of the 2008/09 financial year, which ended 30 June 2009, as well as information on the spending of local government conditional grants. The statement is available on the National Treasury’s website: www.treasury.gov.za.
National Treasury publishes this information in terms of section 71 of the Municipal Finance Management Act, 2003 (Act No. 56 of 2003) (MFMA), and in terms of section 32(2) of the 2008 Division of Revenue Act.
This information is commonly referred to as the in-year management, monitoring and reporting system for local government (IYM), and is intended to enable provincial and national government to exercise oversight of municipalities, and identify possible problems in the implementation of municipal budgets and conditional grants.
The information is based on the section 71 MFMA reports that each municipal manager and chief financial officer are required to sign and which had to be submitted to the National Treasury by 12 August 2009. Any queries on budget, revenue or expenditure numbers reflected in the statement should therefore be referred to the relevant municipal manager or the relevant chief financial officer. Queries on conditional grants may also be referred to the relevant transferring official of the national department responsible for administering the grant.
The information released together with this press statement reflects aggregated municipal financial performance information for the fourth quarter of the 2008/09 financial year for all of the 283 municipalities. Note that this is the first time that the complete coverage has been achieved.
Note that the budgeted figures for municipalities are based on the 2008/09 revised budget statements tabled in the various municipal councils during February 2009.
The following section outlines some of the important trends that emerge from this information:
Highlights:
By 30 June 2009 (fourth quarter year to date (YTD) results for the 2008/09 financial year), municipalities in aggregate had spent 90.9 percent or R165 billion of the R181.6 billion total adjusted budget. On the revenue side they have however collected in aggregate 92.5 percent or R182.4 billion of the R197.2 billion total adjusted revenue budgets.
Metropolitan municipalities have on average collected only 84.8 percent of their revenue at the end of the fourth quarter or R103.9 billion of the adjusted budget of R122.6 billion.
Metropolitan municipalities have spent R24.8 billion or 93.8 percent of their aggregated adjusted capital budget of R26.4 billion as at 30 June 2009. The highest percentage spent is by eThekwini at 106.3 percent or R6.3 billion out of a R5.9 billion adjusted capital budget, followed by city of Johannesburg at 102.3 percent or R6.6 billion out of a R6.4 billion adjusted capital budget and Cape Town at 95.2 percent or R5 billion of R5.2 billion adjusted capital budget. The lowest capital spend is in the Ekurhuleni metropolitan municipality at 66.1 percent.
Of particular concern is that 2010 FIFA World Cup host cities like Mbombela spent only 53.4 percent of their adjusted capital budget and Rustenburg at 60.5 percent.
Given the economic slowdown, National Treasury anticipated that municipal revenue collection would have begun to come under some pressure and that consumer debts would show an increasing upward trend in this fourth quarter. At present municipal revenues are holding up well. Among the metropolitan municipalities the data suggests that the economic downturn is noticeably affecting the collection of revenues in Nelson Mandela Bay and Ekurhuleni. Both of these metropolitan municipalities have large exposure of the vehicle and engineering manufacturing industries, which have been particularly hard hit by the recession.
Consumer debtors among the other metros and other municipalities also show signs of an upward trend; but this is not a recent phenomenon and it is not entirely clear that it can be fully attributed to the economic slowdown, as opposed to a poor fiscal effort on the part of many municipalities.
Nationally, consumer debts amount to R50.4 billion as at 30 June 2009 (not audited figures). Metropolitan municipalities are owed a total of R29.4 billion. This is an increase of R2.8 billion or 10.4 percent from the same period last year. The city of Johannesburg is still owed the largest amount at R9.1 billion. It is followed by Ekurhuleni at R6.8 billion and eThekwini and Cape Town at approximately R4.5 billion each.
Consumer debts owing to secondary cities amounted to R8.3 billion as at 30 June 2009 and have increased by 36.6 percent or R2.2 billion from the corresponding period last year. As with the metropolitan municipalities consumer debtors owing over 90 days constitute a very large proportion, comprising of R6.6 billion or 80 percent of the total amount outstanding.
The creditor age analysis shows R6.8 billion is owed by municipalities as at 30 June 2009. Northern Cape has the highest percentage of creditors outstanding for more than 90 days at 44.5 percent, followed by North West at 44.1 percent and Free State at 23.6 percent. Mpumalanga and Eastern Cape range between nine to 11 percent for creditors outstanding for more than 90 days, while Gauteng, KwaZulu-Natal, Western Cape and Limpopo lie between zero and two percent. This may indicate that municipalities in North West and Northern Cape are no longer able to pay their creditors due to serious cash flow problems.
On aggregate municipalities spent 5.5 percent of their total adjusted budget (operating plus capital) on repairs and maintenance year to date. The fourth quarter expenditure amounts to 1.5 percent of the total adjusted or R2.8 billion of R181.6 billion and still points to insufficient provision for the maintenance of existing infrastructure.
For the first time a detailed report on the over and under spending of municipalities as at 30 June 2009 is included in the publication. This will become a practice to be continued at the end of every municipal financial year. There was under spending of R16.6 billion on the total municipal expenditure budget. Municipalities in Eastern Cape and Gauteng under spent by R4.7 billion and R5.7 billion respectively.
Analysis of the capital expenditure indicates that capital budget under spending occurred in Gauteng to the value of R1.7 billion. Municipalities in the Eastern Cape under spent by R1.6 billion and in Mpumalanga by R1.4 billion. Over spending of the operating budget of R2.3 billion occurred in Limpopo. While Gauteng, Eastern Cape and Free State all under spent by R4 billion, R3.1 billion and R1.6 billion respectively.
35 municipalities overspent their total adjusted budgets to the total amount of R2.6 billion while 182 municipalities under spent to the amount of R19.1 billion. When analysing the capital adjusted budget spending, 177 municipalities under spent to the amount of R7.3 billion and 32 municipalities overspent to the amount of R350 million. Analysis of the operating adjusted budget indicates that 24 municipalities overspent their operating budget to the value of R2.6 billion while 166 municipalities under spent to the value of R12.3 billion.
A very significant risk going forward is that municipalities’ spending plans outstrip realistically collectable revenues, especially given the economic recession. If municipalities are to avoid hitting a cash flow crisis they will need to align their spending plans to their expected revenues in their upcoming adjustments budgets.
Conditional grants:
Note that between the period; April 2009 to June 2009 it is recorded against the 2008/09 allocations to accommodate the municipal financial year of the municipalities.
As at 30 June 2009, the national transferring officers reported expenditure of 83 percent of total conditional grant transfers.
Expenditure on the neighbourhood development partnership grant (NDPG) and the pubic transport infrastructure and systems grant (PTIS) was 54.4 percent and 49.7 percent of total transfers respectively. These grants continue to be worst performing programmes.
However, the 2010 World Cup stadiums development partnership grant and the municipal infrastructure grant remain the two best performing programmes for the 2008/09 financial year. As at 30 June 2009 these programmes reflect expenditures of 98.2 and 88.4 percent respectively.
Structure of information released:
The information being released on National Treasury’s website as part of this process includes the following:
* press release, this document
Municipal budget statements:
* over and under spending analysis for all 283 municipalities
* high level summary of revenue for all 283 municipalities
* high level summary of expenditure for all 283 municipalities
* consolidation of revenue and expenditure numbers for each municipality in one
file.
Summary per function (electricity, water, etc):
* High level summary of revenue per function
* High level summary of expenditure per function
* High level summary of repairs and maintenance
Detail per province per municipality:
* Eastern Cape
* Free State
* Gauteng
* KwaZulu-Natal
* Limpopo
* Mpumalanga
* Northern Cape
* North West
* Western Cape
Summary of conditional grant (CG) information:
* per province
* per programme
Conditional grant, detail per province per municipality:
* Eastern Cape
* Free State
* Gauteng
* KwaZulu-Natal
* Limpopo
* Mpumalanga
* Northern Cape
* North West
* Western Cape
Summary information (Section 71):
* summary, fourth quarter; metropolitan municipalities
* summary, fourth quarter, top 21
Non compliance:
* list of non compliance to section 71 of the MFMA
All information is available on the National Treasury’s website at
http://www.treasury.gov.za/legislation/mfma/media_releases/section_71_4th_0809/
This information will assist policy makers, researchers, sector specialists, elected representatives, academics and those responsible for implementation. The MFMA envisages that regularly published budget implementation information will enable and empower communities to hold their municipal councils accountable.
A summary of key aggregated tables is included and can be found as part of Annexure A (http://www.info.gov.za/speeches/docs/treasury_annex_a.pdf)
Enquiries:
Jan Hattingh
Tel: 012 315 5009
E-mail: Jan.Hattingh@treasury.gov.za
Issued by: National Treasury
28 August 2009
