BCM rated as No 2 metro
How capital spent not analysed in study
BUFFALO City Metro has been rated as the country’s second most financially stable metropolitan municipality after Cape Town.
Ratings Afrika gives BCM a rating of 73 out of 100 in its latest annual Municipal Financial Stability Index (MSFI). It is just two points behind Cape Town, which received a rating of 75.
Makana municipality is considered the weakest municipality in the Eastern Cape, with a score of just 17 out of 100, while Senqu scored the highest with 77.
In fact, Senqu received the second-best score in the country, just one point shy of joint top-rated municipalities Hesssequa in the Western Cape and KwaDukuza in KwaZulu-Natal, which both scored 78.
Overall, Ratings Afrika estimated that 60% of the country’s key municipalities received a score of less than 50, an indication they were in deep financial trouble.
“This reflects a situation of significant concern regarding their financial capacity for service delivery.”
About 42% of municipalities scored less than 35 and were considered to be “not financially sustainable”.
Ratings Afrika analysts Leon Claassen and Charl Kocks say in the report that the MSFI is a scoring model that evaluates the operating performance, liabilities management, budget practices and liquidity position of municipalities which are then scored out of 100.
Claassen explained that BCM’s high rating was based largely on its audited financial statements. “The balance sheet of Buffalo City looks good with a healthy liquidity position [more than R2-billion in the bank] and a very low level of borrowings.
“The operating performance for 2015 was not so good but this is reflected in the score it achieved.” The score was down from 2014 where it received 78.
He emphasised that in terms of capital spending on infrastructure, Ratings Afrika measured only the amount that had been spent and did not assess if it was spent in an incorrect or corrupt way.
“It is for the Auditor-General [AG] to detect that during the audit process.” He said that, like most municipalities, BCM could definitely spend more on maintenance.
Meanwhile, the AG has not been as kind to BCM. It has consistently received qualified audits with serious material findings as compared to Cape Town, which has received unqualified audits for over a decade, the last three being defined as “clean”.
AG Kimi Makwetu last year singled out BCM and Nelson Mandela Bay Metro – which together administered a combined budget of R15billion, representing 44% of the total provincial municipal budget –- as being of particular concern.
He said they were “not able to submit credible and reliable financial statements, which then required material amendments during the audit process”. Nelson Mandela Bay scored 58 on the MFSI.
The MFSI report found most municipalities in the Free State and North West – with average scores of 25 and 26 respectively – to be in serious financial trouble.