The National Treasury has today published on its website the operating and capital budgets of municipalities as adopted by their respective councils. These budgets give an overview of expected revenue and expenditure trends in local government over the next three years, referred to as the 2020/21 Medium Term Revenue and Expenditure Framework (MTREF). The revenue and expenditure numbers are aggregated from the annual budgets that municipal managers are legally required to submit to the National Treasury and the relevant provincial treasury.
The published information is presented in a variety of ways, including aggregated municipal budget totals for the 2020/21 financial year and over the medium-term period. In addition, the information is presented per category of municipality and per province. Highlights include:
- In aggregate, budgeted revenue for 2020/21 is R452.6 billion, which is expected to increase to R479.1 billion in 2021/22 and R509.9 billion in 2022/23.
- Total municipal expenditure in 2020/21 is estimated to be R489.4 billion, increasing to R508.9 billion in 2021/22 and R538.1 billion in 2022/23. Total expenditure for 2020/21 is 1.6 per cent higher than the 2019/20 MTREF.
- In the 2020/21 financial year, a net deficit of R5.1 billion is expected, a position that remains in deficit of R140.4 million in 2021/22 and changes to a surplus of R2.5 billion in 2022/23.
- Municipal operating expenditure on the trading services consisting of water, energy sources, wastewater management and waste management is budgeted to decrease from R202.9 billion in 2019/20 to R201.5 billion in 2020/21. In 2020/21 this equates to just under half of the total operating expenditure of municipalities.
- Bulk purchases of electricity and water total R115.7 billion of the aggregated operating expenditure of R419.3 billion or 27.6 per cent. Bulk purchases are expected to grow to R132.4 billion by 2022/23 representing 28.3 per cent of total operating expenditure; bulk purchase of electricity from Eskom is a significant contributing factor to this growth.
- Reporting on operational repairs and maintenance figures has been institutionalised as part of Section 71 in-year reporting. R31.5 billion will be allocated in 2020/21 to repairs and maintenance of assets from operating expenditure. This will increase to R33.8 billion in 2021/22 and to R35 billion in 2022/23.
- Capital expenditure has decreased by 10.5 per cent compared to the 2019/20 MTREF. Of the overall budget of municipalities, capital expenditure in aggregate represents 14.3 per cent in 2020/21, 13.3 per cent in 2021/22 and 13.1 per cent in 2022/23.
- Total capital expenditure for 2020/21 is R70.1 billion and comprises R30.3 billion for trading services (electricity, water, wastewater management and waste management). Expenditure on the four trading services will increase to R31.2 billion and to R32.8 billion in the outer years of the MTREF.
- The 2020/21 capital budget reflects a R47.5 billion investment in new infrastructure which is 67.7 per cent of the total capital budget. Investment in the renewal and upgrading of existing assets will be approximately R22.6 billion or 32.3 per cent of the capital budget.
The National Treasury publishes local government MTREF information on an annual basis. Regularly published budget information enables communities to hold their municipal councils to account. The information is also used by National Treasury as the basis for the In-year Management, Monitoring and Reporting System for Local Government (IYM). The Section 71 reports published by the National Treasury give an account of actual revenue collection and spending by municipalities per quarter against their budgeted figures. All this information feeds into the Municipal Money open local government data portal and can be accessed as follows: www.municipalmoney.gov.za. In addition, the Municipal Money time series data can be accessed directly from http://municipaldata.treasury.gov.za.
To improve the quality of reporting, the Municipal Budget and Reporting Regulations promulgated in 2009 prescribed new budget reporting formats for municipalities. In terms of the 2009 regulations, municipalities had to submit their 2020/21 MTREF budgets in the prescribed A1 Schedules as per the regulations.
Annexure A sets out the full list of information that can be found on the website, and a high- level summary of information in terms of category of municipality and per province.
Annexure B contains an aggregated summary of municipal operating and capital budgets for the 2019/20 Medium Term Revenue Expenditure Framework (MTREF); and
Annexure C contains a set of key graphs articulating the numbers in graphical format. Go to www.treasury.gov.za/mfma for more information.
Note to editors:
- Section 24(3) of the Municipal Finance Management Act, 2003 (Act No. 56 of 2003) (MFMA) requires the Accounting Officer of a municipality to submit the municipality’s adopted annual budget to National Treasury and the relevant provincial treasury once approved by the Council.
- The publication of annual municipal budgets is a continuation of efforts by the National Treasury to disseminate as much local government financial information as possible in the public domain. The information and financial data that is the subject of this publication contain national aggregated municipal budget amounts for the 2020/21, 2021/22 and 2022/23 financial years for all municipalities and are summarized in a variety of ways including analyses per municipal category and per province.
- This information is deemed to be critical for policy makers, researchers and sector specialists. It is anticipated that the dissemination of this information will assist in improving municipal accountability and will also serve as the basis for strengthening the In-year Management, Monitoring and Reporting System for Local Government (IYM) (Section 71 of the MFMA).
- In terms of the process, Municipal Managers and Chief Financial Officers are required to submit their adopted budgets and supporting schedules as well as budget related mSCOA data strings to the National Treasury by the latest 30 October 2020. Any queries on the figures in these statements should therefore be referred to the relevant Municipal Manager or Chief Financial Officer.
- A municipal budget must be funded in terms of Section 18 of the MFMA before a municipal Council can adopt that budget for implementation. A funded budget is essentially a budget that is funded by a combination of cash derived either from realistically anticipated revenues to be collected in that year and cash backed surpluses of previous years. It is a common practice amongst most municipalities when preparing their annual budgets to overstate or inflate revenue projections, either to reflect a surplus or on the surface to show that excess expenditure requirements are adequately covered by revenues to be collected. Hence, the revenue estimates are seldom underpinned by realistic or realisable revenue assumptions resulting in municipalities not being able to collect this revenue and therefore finding themselves in cash flow difficulties. Should such situations arise, municipalities must adjust expenditure downwards to ensure that there is sufficient cash to meet these commitments.
- This 2020/21 MTREF publication covers 256 municipalities.
