Summary
The second quarter local government budget statement was released today by the National Treasury. The statement covers revenue and expenditure for the first six months of the 2009/10 municipal financial year, which ended on 31 December 2009. The publication also includes information on the spending of local government conditional grants. The statement is available on the National Treasury’s website: http://www.treasury.gov.za.
National Treasury publishes this information in terms of section 71 of the Municipal Finance Management Act (MFMA), 2003 (Act No. 56 of 2003), and in terms of section 44(3) of the2009 Division of Revenue Act. This information, referred to as the in-year management, monitoring and reporting system for local government, will enable provincial and national government to exercise oversight of municipalities, and identify possible problems in the implementation of municipal budgets and conditional grants.
All information in this publication is based on the section 71 MFMA reports that each municipal manager and chief financial officer were required to sign and submit to the National Treasury by 5 February 2010. Therefore, any queries on the budget, revenue or expenditure figures reflected in the statement must be referred to the relevant municipal manager or chief financial officer. Queries on conditional grants may be referred to the relevant transferring official of the national department responsible for administering the grant.
The information released with this press statement aggregates the municipal financial performance information for the second quarter of the 2009/10 financial year for 274 municipalities. The coverage of municipal financial information in terms of section 71 of the MFMA has increased from 239 municipalities published for the first quarter of the 2009/10 financial year to 274 municipalities for the second quarter of 2009/10.
The budgeted figures disclosed are based on the 2009/10 adopted budget statements tabled in the various municipal councils during May and June 2009. In some municipalities the amount reported as the adopted budget differs substantially from the actual amount adopted by Council. This area of work needs substantial attention by those municipalities.
Some of the notable trends that emerge from this information include:
Highlights
At 31 December 2009 (second quarter year to date results for the 2009/10 financial year), municipalities in aggregate had spent 46.6 percent or R90.8 billion of the R194.7 billion total adopted budget. On the revenue side they have collected in aggregate 49.0 percent or R102.9 billion of the R210.1 billion total adopted revenue budget.
Metropolitan municipalities have collected 46.5 percent of their revenue at the end of the second quarter or R59.9 billion of the adopted revenue budget of R128.9 billion. The city of Johannesburg has collected the highest proportion of its revenue at 52.5 percent, with Ekurhuleni metro following at 48.4 percent.
Of the aggregated adopted capital budget amounting to R23.4 billion for metropolitan municipalities, R9.7 billion or 41.3 percent has been spent as at 31 December 2009. The highest percentage spent is by eThekwini at 61 percent or R3.3 billion out of a R5.4 billion adopted capital budget, followed by city of Johannesburg at 58.9 percent or R2,1 billion out of a R3.5 billion adopted capital budget and Cape Town at 35.3 percent or R2.2 billion of a R6.2 billion adopted capital budget. The lowest capital spending is in the Ekurhuleni Metro at 20.7 percent.
National consumer debts amount to R56.3 billion as at 31 December 2009 (unaudited figures). Metropolitan municipalities are owed a total of R31.3 billion as at 31 December 2009. This is an increase of R1.6 billion or 5.3 percent from the same period in the previous year. The biggest increases compared to the same quarter in the previous year are in Cape Town at 24.6 percent or R966 million, eThekwini at 22.3 percent or R877 million and Ekurhuleni Metro at 16.8 percent or R1.1 billion.
Consumer debts owing to secondary cities amount to R11.5 billion as at 31 December 2009 and have increased by 12.8 percent or R1.3 billion from the corresponding period last year. As with the metropolitan municipalities consumer debtors over 90 days constitute a very large proportion, comprising of R8.7 billion or 76 percent of the total amount outstanding.
The creditor age analysis shows R8.2 billion is owed by municipalities as at 31 December 2009 compared to the R7.6 billion reported in quarter one of 2009/10. Free State has the highest percentage of creditors outstanding for more than 90 days at 23 percent, followed by Mpumalanga at 15 percent, Eastern Cape at 14.1 percent and Northern Cape at 12.6 percent. The creditor age analysis results differ vastly from quarter to quarter. The rest of the provinces’ creditors outstanding for more than 90 days are lower than nine percent.
Metros spend on average 2.8 percent of their total budgets on repairs and maintenance. Ekurhuleni metro spent 5.1 percent or R700 million of a total budget of R13.6 billion while city of Johannesburg reported zero spending on Repairs and Maintenance for the second quarter. These numbers are probably distorted by under-reporting of repairs and maintenance due to classification discrepancies when municipalities capture these expenditures. While the new budget formats begin to deal with this problem, it will only be fully resolved once there is a uniform Municipal Standard Chart of Accounts in place.
Given the economic slowdown, we anticipated that revenue collection would have begun to come under substantial pressure and consumer debts to show an increasing upward trend by the second quarter. At present municipal revenues are holding up fairly well. This may be attributed to the property rates collected at the beginning of the financial year together with transfers from national government, though there are signs of an upward trend in the consumer debt numbers.
Conditional grants
As far as conditional grants are concerned, R21.9 billion was originally gazetted through the 2009 Division of Revenue Act (Act No.12 of 2009) for local government for both direct and indirect grants. However, this amount does not include the unconditional grant (equitable share) amounting to R23.8 billion which brings the total amount allocated to local government to R45.7 billion. Direct conditional grants to municipalities amounted to R19 billion for the 2009/10 financial year.
However, these allocations have since been adjusted in line with the December adjustment gazette reflecting additional allocations, new allocation, re-allocations, rollovers and technical adjustments to local government spheres. These adjustments were done in terms of Sections 6(3) and 37 and re-allocations in terms of Section 29 of the 2009 Division of Revenue Act.
To date, of a total of R19.3 billion allocated to municipalities for 2009/10 financial year, a total amount of R11.2 billion has been transferred for direct grants as at 31 December 2009. According to expenditure reports provided by the national departments only 48.7 percent was spent against the total conditional grant allocations.
The spending analysis for the second quarter indicates that the 2010 FIFA World Cup stadiums development grant remains the best performing programme in both the previous and the current financial year with expenditure of 84 percent for this second quarter, followed by public transport infrastructure and systems grant and water services operating and transfer subsidy grant with expenditure of 66.9 and 63.9 percent respectively.
Structure of Information released:
The information released on National Treasury’s website as part of this process includes the following:
Press Release: this document
Municipal budget statements:
* cash flow closing balances as at 31 December 2010
* high level summary of revenue for 274 municipalities
* high level summary of expenditure for 274 municipalities
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
Consolidation of revenue and expenditure numbers for each municipality in one file
Detail per province per municipality:
* Eastern Cape
* Free State
* Gauteng
* KwaZulu-Natal
* Limpopo
* Mpumalanga
* Northern Cape
* North West
* Western Cape
Summary of conditional grant 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: second quarter, metros
* Conditional grant summary: second quarter, Metros
* Summary: second quarter, top 21 municipalities
* Summary: second quarter, provinces
* Analysis of sources of revenue
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/. 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 form the Treasury website.
Enquiries:
Jan Hattingh
Tel: 012 315 5009
E-mail: Jan.Hattingh@treasury.gov.za
Issued by: National Treasury
25 February 2010
