The National Treasury has today released local government’s revenue, expenditure and spending on conditional grants for the second quarter of the 2012/13 financial year focusing on 274 of the 278 municipalities. During this reporting period four municipalities neglected to report. The period under review starts from 1 July 2012 to 31 December 2012 of the municipal financial year.
This report is part of the In-year Management, Monitoring and Reporting System for Local Government (IYM), which enables provincial and national government to exercise oversight over municipalities, and identify possible problems in implementing municipal budgets and conditional grants.
In-year reporting is now well institutionalised with most municipalities consistently producing in-year financial reports compared to three years ago when less than 50 municipalities regularly produced quarterly financial reports.
The reporting facilitates transparency, better in-year management and oversight of budgets, making these reports management tools and early warning mechanisms for councils to improve municipal performance.
Key trends
Aggregate trends
1. On aggregate, municipalities spent 41.3 per cent or R116.3 billion of the total adopted budget of R281.6 billion. In respect of revenue, aggregated billing and other revenue amounted to 48.6 per cent or R136.3 billion of a total revenue budget of R280.8 billion.
2. The aggregated adopted capital budget for all municipalities in the 2012/13 financial year was R51.8 billion of which only R13.9 billion or 26.8 per cent was spent in the second quarter. However, past performance suggests that this number will improve toward the end of the municipal financial year, a trend that should not be a practice in a municipal context given the accrual nature of municipal accounts.
3. Metropolitan municipalities achieved 48.3 per cent or R79.5 billion of billed and other revenue of the total adopted revenue budget of R164.8 billion. Buffalo City has the highest proportion at 56.4 per cent, followed by Ekurhuleni Metro at 53.1 per cent. The lowest was reported by City of Tshwane at 46.1 per cent.
4. A quarter-on-quarter comparison of the in-year figures shows that on average, metros realised an increase in revenue of 14 per cent compared to the second quarter of the previous financial year. Most of this increase can be attributed to higher rates and tariffs, rather than efficiency improvements in revenue management.
5. Metropolitan municipalities spent 43.3 per cent or R71.2 billion of the total adopted expenditure budget of R164.5 billion for the 2012/13 financial year.
6. The aggregated adopted capital budget for metros in the 2012/13 financial year was R25.1 billion, 26.7 per cent of which (R6.7 billion) was spent by 31 December 2012.
a. By the end of the second quarter Nelson Mandela Bay had spent 43.1 per cent of its adopted capital budget and Mangaung 36.0 per cent.
b. Spending was low in Buffalo City and the City of Joburg where less than 20 per cent of the adopted capital budget was spent by the end of the second quarter.
7. In aggregate, metros spent the following on core services when measured against their adopted budgets:
a. Water R8.4 billion or 48.1 per cent;
b. Electricity R25.8 billion or 49.2 per cent;
c. Waste water management R1.8 billion or 44.5 per cent; and
d. Waste management R2.7 billion or 42.9 per cent.
8. The spending on core services for the secondary cities was as follows:
a. Water R1.7 billion or 48.7 per cent;
b. Electricity R5 billion or 41.5 per cent;
c. Waste water management R570 million or 46 per cent; and
d. Waste management R470 million or 43.9 per cent.
9. Aggregate municipal consumer debts were R83.7 billion as at 31 December 2012. National and provincial government debt accounts for 5.4 per cent or R4.5 billion of this amount. At R52.5 billion, (62.7 per cent) households account for the largest proportion of consumer debt.
10. As at 31 December 2012, outstanding debt due to Metropolitan municipalities increased by 6.3 per cent to R47.3 billion from the second quarter of the 2011/12 financial year. The City of Joburg’s share was R16.5 billion or 34.9 per cent of all metros.
11. Outstanding consumer debt in secondary cities totalled R15.4 billion as at 31 December 2012. This represents an increase of 17.6 per cent from the R13.1 billion reported in the corresponding period in the 2011/12 financial year. Household debt accounts for R10.8 billion or 70.3 per cent of the total outstanding debt. Of the total debt, R12.1 billion or 78.8 per cent has been outstanding for more than 90 days.
12. The creditor’s age analysis shows R14.7 billion is owed by municipalities as at 31 December 2012. Free State has the highest percentage of creditors outstanding for more than 90 days at 66.2 per cent of total outstanding municipal creditors, followed by North West (52.5 per cent) and Northern Cape (43 per cent).
13. Analysis of the collection rates indicates that while municipalities have budgeted for a 92.3 per cent collection rate, the year-to-date figures are indicative of an actual collection of billed revenue of 91.1 per cent. The fact that some municipalities bill yearly property rates in July distorts this analysis.
a. The metros budgeted for a 93.6 per cent collection rate and achieved an actual collection of 96.3 per cent; 2.7 per cent higher than the target.
b. The secondary cities reported collection against billed revenue at 85.8 per cent which is significantly less than the budget target of 90.4 per cent.
14. Information on municipal borrowing detailing borrowing instruments by municipality is available on a quarterly base. As at 31 December 2012, the total end balance for borrowing instruments of all municipalities amounted to R47.2 billion.
15. Monthly repairs and maintenance figures reported by municipalities are now included in the Section 71 publication. Two dimensions are reported: per asset class and operational expenses.
Conditional Grants
16. The Division of Revenue Act, 2012 (Act No.5 of 2012) allocated R35.5 billion as conditional transfers (both direct and indirect transfers) to local government. This amount excludes the unconditional transfer (Equitable Share) of R33.5 billion, RSC Levy replacement grant of R3.7 billion, support for councillor remuneration of R658 million and the sharing of the fuel levy of R9 billion. This brings the total amount allocated to local government to R82.4 billion.
17. The RSC Levy replacement grant, support for councillor remuneration and the sharing of the fuel levy are classified as unconditional grants and municipalities can appropriate the grants as own revenue and subsequently do not have to report on specific performance.
18. From the R35.5 billion allocated to municipalities for 2012/13 financial year, R30.1 billion (including the USDG) of conditional grants are directly transferred into the municipal primary bank account and R5.1 billion is allocations in-kind.
19. Of the R330 million Disaster Management Grant (MDG) only R14.2 million was allocated against a municipality in Limpopo.
20. An amount of R14.7 billion was transferred by the national departments administering the grants to municipalities which constitute 53 per cent of the total direct conditional grant allocations. According to expenditure reports provided by the national departments, only 31.4 per cent was spent against the total conditional allocations as at 31 December 2012.
21. The expenditure analysis as at 31 December 2012 indicates an average performance of 33.8 per cent or R7.7 billion of the R22.7 billion based on the performance as reported by municipalities.
22. The expenditure reported by municipalities of 31.4 per cent for the first quarter excludes performance by all metropolitan municipalities receiving the USDG which totals R7.4 billion and all schedule 7 grants.
23. Second quarter performance continues to indicate low performance with both the 2011/12 and 2012/13 financial years indicating expenditure less than 50 per cent. Over the years municipalities struggled to improve the grant performance because they are still confronted by technical delays, supply chain management challenges and other external factors that delay the implementation of projects, particularly infrastructure related projects.
Further details on this report can be accessed on the National Treasury’s website:
Note to editors
This information is published in terms of Sections 71 of the Municipal Finance Management Act, 2003 (Act No. 56 of 2003) (MFMA) and 30(3) of the 2012 Division of Revenue Act. The budgeted figures shown are based on the 2012/13 adopted budgets approved by municipal councils prior to the end of June 2012.
In terms of the process, Municipal Managers and Chief Financial Officers were required to sign and submit adopted budget figures to the National Treasury by 9 October 2012. Any queries on the figures in the statement should therefore be referred to the relevant Municipal Manager or Chief Financial Officer. Queries on conditional grants may be referred to the national department responsible for administering the grant.
Results for the second quarter of the financial year start to provide an indication of trends that are emanating in municipal expenditure when compared to the previous year. These results feed into the Section 72 mid-year performance assessments of the municipalities and strongly influences the adjustment budgets.
All information in this statement is based on the Section 71 monthly MFMA reports that Municipal Managers and Chief Financial Officers were required to sign and submit to the National Treasury by 30 January 2013. Any queries on the figures in the statement should therefore be referred to the relevant Municipal Manager or Chief Financial Officer. Queries on conditional grants may be referred to the national department responsible for administering the grant.
This second quarter publication covers 274 of the 278 municipalities; during this reporting period four municipalities neglected to report.
Structure of information released
Other information released on National Treasury’s website (www.treasury.gov.za) as part of this process includes the following:
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Municipal Budget Statements:
- Cash Flow closing balances as at 31 December 2012,
- High-level summary of revenue for 274 municipalities, and
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High-level summary of expenditure for 274 municipalities.
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Summary of revenue and expenditure per function (electricity, water, etc):
- High level summary of revenue per function, and
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High level summary of expenditure per function.
- Consolidation of revenue and expenditure numbers for each municipality in one file.
- Detail per province per municipality.
- Summary of Conditional Grant (CG) Information for all municipalities and per grant.
- CG - Detail per province per Municipality.
- Summary of Conditional Grant (CG) information per programme.
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Section 71 summary information for the fourth quarter:
- Summary of total monthly operating revenue – 274 municipalities;
- Summary of total monthly operating expenditure – 274 municipalities;
- Summary of total monthly capital revenue – 274 municipalities;
- Summary of total monthly capital expenditure – 274 municipalities;
- Aggregated information for Metros – Section 71;
- Aggregated information for Metros – Conditional Grants;
- Aggregated information for secondary cities – Section 71;
- Aggregated information for secondary cities – Conditional Grants;
- Aggregated information for Provinces – Section 71;
- Aggregated information for Provinces – Conditional Grant;
- Analysis of Sources of Revenue – 278 municipalities; and
- Listing of borrowing instruments – 193 municipalities.
- Repairs and maintenance reported per asset class;
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Repairs and maintenance reported operational expenditure.
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Non Compliance:
a. List municipalities not complying with Section 71 of the MFMA.
The section 71 information reported by municipalities to National Treasury is now being published on the National Treasury website in the format of Schedule C, which is the format for monthly and quarterly municipal financial statements as prescribed by the Municipal Budget and Reporting Regulations.
