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 2021/22 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 2021/22 financial year and over the medium-term period. In addition, the information is presented per category of municipality and per province. Highlights include:
• The aggregated budgeted revenue for 2021/22 is R489 billion, which is expected to increase to R517.7 billion in 2022/23 and R540.9 billion in 2023/24.
• Total municipal expenditure in 2021/22 is estimated to be R521.3 billion, increasing to R547.9 billion in 2022/23 and R572.7 billion in 2023/24. Total expenditure for 2021/22 is 6.5 per cent higher than the 2021/22 financial year.
• A net deficit of R4.6 billion is expected in the 2021/22 financial year, a position that remains in deficit of R2.9 billion in 2022/23 and R3.4 billion in 2023/24.
• Municipalities will realise operating deficits on the aggregated operating budgets over the 2021/22 MTREF as the total operating expenditure increases at a higher rate than the revenue projections. This is an indication that municipalities are living beyond their means and a first sign of financial challenges.
• The main cost drivers are employee related costs and materials and bulk purchases representing 29.3 per cent and 33 per cent of the operating expenditure respectively. Municipalities are experiencing a two-fold impact of the high electricity and water tariff increases; lower sale levels owing to changes in consumption patterns and increased bad debt as a result of affordability pressures.
• Reporting on operational repairs and maintenance figures has been institutionalised as part of Section 71 in-year reporting. Municipalities allocated R26 billion to repairs and maintenance of assets in 2021/22. This will increase to R27 billion in 2022/23 and to R28.1 billion in 2022/23.
• Capital expenditure has decreased by 1.5 per cent compared to the original budget for the 2020/21 financial year. Capital expenditure in aggregate represents 13.2 per cent in 2021/22, 12.8 per cent in 2022/23 and 12.5 per cent in 2023/24 of the overall budget of municipalities.
• Trading services (electricity, water, wastewater management and waste management) represents 46.9 per cent of the total capital expenditure of R69 billion in 2021/22 and further increases to 49.5 per cent by 2023/24.
• The 2021/22 capital expenditure budget reflects a R42.6 billion investment in new infrastructure which is 61.7 per cent of the total aggregated capital budget. Investment in the renewal and upgrading of existing assets is much lower at R11.3 billion or 16.3 per cent and R15.1 billion or 21.9 per cent of the total capital budget respectively.
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 2021/22 MTREF budgets in the prescribed A1 Schedules as per the regulations.
Go to www.treasury.gov.za/mfma for more information.
