its operational shortfall increased from R1,4 billion in 2014 to R1,6 billion in 2015 confirming that its operating expenses are far too high for its revenue base. Furthermore, the pre-paid electricity meter project seems to be ineffective and more detrimental than beneficial as their revenue collection rate has declined from 95,5% in 2014 to 94,4% in 2015. It is likely that the implementation cost thereof exceeded the benefits. 4 Conclusion Given that the financial stability of the key local municipalities in South Africa is weak, our expectation is that the quality of service delivery is likely to deteriorate over the short to medium term. Weak service delivery impacts quality of living as well as the economic growth and development that are desperately needed to reduce unemployment in the country. In many cases the differentiating factors between financially stable municipalities compared with weak ones are the skill levels, experience, financial discipline and quality of management under sound governance guidance of the political leadership at municipal level. The weak financial stability of the municipal sector is detrimental to the South African economy and might place additional financial pressure on the central government for financial support to keep unstable operations going. The South African municipal sector is currently in a bad financial state as reflected by the weak financial stability. Correction will require decisive political leadership that looks after the interests of the residents including that of the business community rather than its own, roots out corruption, appoints managers with the right skills and experience to implement sound budgetary practices, and exercises strict financial discipline. The current political leadership in control of the majority of municipalities has demonstrated over the last five years and more to not being capable of sound governance. This is the main cause of their low financial sustainability.
its operational shortfall increased from R1,4 billion in 2014 to R1,6 billion in 2015 confirming that its operating expenses are far too high for its revenue base. Furthermore, the pre-paid electricity meter project seems to be ineffective and more detrimental than beneficial as their revenue collection rate has declined from 95,5% in 2014 to 94,4% in 2015. It is likely that the implementation cost thereof exceeded the benefits. 4 Conclusion Given that the financial stability of the key local municipalities in South Africa is weak, our expectation is that the quality of service delivery is likely to deteriorate over the short to medium term. Weak service delivery impacts quality of living as well as the economic growth and development that are desperately needed to reduce unemployment in the country. In many cases the differentiating factors between financially stable municipalities compared with weak ones are the skill levels, experience, financial discipline and quality of management under sound governance guidance of the political leadership at municipal level. The weak financial stability of the municipal sector is detrimental to the South African economy and might place additional financial pressure on the central government for financial support to keep unstable operations going. The South African municipal sector is currently in a bad financial state as reflected by the weak financial stability. Correction will require decisive political leadership that looks after the interests of the residents including that of the business community rather than its own, roots out corruption, appoints managers with the right skills and experience to implement sound budgetary practices, and exercises strict financial discipline. The current political leadership in control of the majority of municipalities has demonstrated over the last five years and more to not being capable of sound governance. This is the main cause of their low financial sustainability.
Financial-sustainability-of-SA-municipalities-2015-Final-4-1.docx