Joburg just keeps getting worse with no plan to save it
Johannesburg, once synonymous with SA’s economic growth and development, is collapsing, and there is neither a plan nor any intent to save it. Of course, much of its development and growth was skewed in favour of a few, but it was growth and development nonetheless.
SA’s largest city has now become a symbol of the country’s economic stagnation and decline. Its infrastructure for the delivery of water and electricity hasn’t been renewed or expanded for decades. Its roads are full of potholes.
The city recently announced that its revenue collection for the financial year to end-June is running way behind budget. So much so that the city is considering revising its R83bn budget down by R6bn.
Joburg’s problem is not only money. The city’s administrative and technical capacity to manage its affairs has been declining over the past decade, if not longer. The political will is also lacking, replaced by a feeding frenzy on whatever finances remain.
That means even if the city’s trees were, by some miracle, to bloom money, the city would not be able to plan and implement any projects, whether it be renewing its roads or upgrading its electricity and water infrastructure. Over and above money, infrastructure projects cannot be implemented without technical and administrative capacity as well as political will. Absent such a drive among the political class, nothing will happen except the feasting on public finances.
For the current financial year a budget of R83bn was approved by the city council — more than R75bn for operating costs and R7.6bn for capital expenditure. This was expected to rise to R88bn in 2024/25 and R95bn in 2025/26.
Joburg is one of eight metropolitan municipalities in SA — they are classified as “category A” on the basis that they can raise their own revenue and have the technical and administrative capacity to manage their affairs when compared to local or district municipalities. But the reality is different.
As the National Treasury noted in its presentation of municipal budgets for 2023/24 last November, the contribution of metros to aggregated municipal revenues is now lower than the projections made in the 2022/23 medium-term expenditure framework.
“This could indicate the revenue challenges that the metros are experiencing due to the changing economic and social environment,” the Treasury said. Its analysis of the problem — that it is the changing and social environment — is correct. But what the Treasury isn’t saying is that most of the metros lack the capacity to assess that changing environment and respond to it.
Another indicator of this thinning of capacity is the reduction in capital expenditure which, as the Treasury correctly points out, means less funding available for building, maintaining or upgrading infrastructure “to ensure economic growth”. It says capital expenditure as a percentage of total expenditure for all municipalities will drop from 12.4% in 2023/24 to 11.5% in 2025/26.
This level of capital expenditure is at the low end of the Treasury’s norm of spending 10%-20% of total expenditure on capital projects. This means a further reduction of the capacity of municipalities to deliver services.
It will result in a vicious cycle — reduced delivery capacity translates to lower revenue collection, since municipalities depend on electricity and water sales for the bulk of their income.
These drivers of revenue are already in decline for other reasons. The Treasury notes, for example, that energy and water are the major revenue drivers at R178.8bn and R96.3bn respectively. The increase in energy revenue of 13.6% in 2022/23 numbers was driven by the 15% tariff increase granted by the energy regulator.
This, the Treasury says, shows that electricity consumption isn’t growing — growth in municipal energy revenue is now coming from the tariff. “The impact of loadshedding has resulted in consumers using alternative energy sources.”
The Treasury’s other point is that metros may on paper appear to make profit from a huge markup on electricity sales, but in reality the difference between the cost of buying electricity in bulk and the total projected revenue generated from electricity sales to residents and businesses is accounted for by the cost — administrative and capital expenditure — that the municipalities must incur.
In summary, things are getting worse and will continue getting worse.