JOBURG ‘THE WORST’

Financially we’re facing a dark future We’ve run out of cash to pay debts Non-service delivery is on the cards

THE CITY of Joburg is financially the worstperforming metro in the country. This is according to Ratings Afrika’s Municipal Financial Sustainability Index (MFSI).

The Joburg council got just 26 points out of 100, with Tshwane not far behind at 32 and Ekurhuleni at 47. Cape Town, among the nine metros, scored the highest at 63 out of 100.

The findings had serious implications for Joburg residents, said MFSI analyst Leon Claassen. The council was cash-strapped, which meant a future of non-service delivery and non-maintenance of infrastructure for residents, he added.

The ratings are based on a general analysis of municipalities’ financial statements. There are four criteria: The municipality’s financial position and its ability to self-fund.

Its operational performance – whether it makes a surplus or a deficit.

Its borrowing or liability management.

Its liquidity, or how much cash in hand it has.

“The same model was used on all the 102 municipal entities we scored – no matter how big or how small,” Claassen said.

Joburg scored badly on all four counts, but especially in terms of its liquidity situation, for which it achieved a negative score.

“This is a severe problem. It means that the city cannot pay its short-term obligations. This, in effect, means that service delivery will suffer, normal maintenance will be done cheaply (and might result in potholes being patched instead of being fixed properly, for instance).

“This will affect long-term service delivery because the degradation will catch up in years to come. If the city does not fix its liquidity problems soon, it is going to have major problems in the future,” Claassen said.

The study was inspired by the public focus on municipalities as a result of poor service delivery, corruption, deteriorating infrastructure and financial mismanagement. It was done to introduce an independent, objective view of the financial stability of municipalities.

“In general, in all 102 municipalities it was found that the general deterioration in the financial stability has been arrested in a number of cases.

“The nine metros, as economic hubs and drivers of economic growth in the provinces, reveal financial weakness in some, while others reflect good stability, even while they experience huge service delivery challenges,” Claassen said.

The metros’ financial instability is caused by the pressure to develop infrastructure, which is only partially funded from own sources, the remainder being from borrowed funds.

Because of the higher debt burden, the liquidity positions of some of the metros, such as Joburg and Tshwane, have weakened, according to Claassen’s report.

Joburg’s liquidity was hampered by its billing crisis and low revenue collection, the study found.

Among the smaller municipalities, Kwadukuza (Stanger/ Ballito) scored the highest with 86, Tlokwe (Potchefstroom) 82, Metsimaholo (Sasolburg) 73 and Midvaal, the only Da-run council in Gauteng, 50. “This shows that in spite of challenges, there are still well-managed municipalities around. They adhere to good budgetary practices, strict financial control and good revenue collection, even during tough economic conditions,” Claassen said.

He expressed concern that more than half the 102 municipalities could not reach a score of 50.