THE POOR STATE OF MUNICIPAL FINANCES IN SOUTH AFRICA
Whether you live in a bustling city or a quiet rural town, many South Africans have witnessed the steady decline of local infrastructure and service delivery over the past decade. A significant contributor to this deterioration is as a result of financial mismanagement. Across the country, municipalities are grappling with poor revenue collection, overspending, and weak financial controls, resulting in unsustainable debt levels and widespread service delivery failures.
In this month’s Financial View, we examine just how dire the situation has become, drawing on insights from the recently released Fourth Quarter Section 71 Report by National Treasury, which covers the period from 1 July 2024 to 30 June 2025.
Revenue Collection Falls Short
One of the most concerning findings is the aggregated actual collection rate of just 72.9% against billed revenue. In practical terms, this means that nearly one in every four Rand billed by municipalities was not collected, severely undermining their ability to fund normal operations, repairs and maintenance and funding of capital projects. Metropolitan municipalities, which had budgeted for a collection rate of 102.7%, managed to collect only 71.1%, exposing a significant gap between budgeted projections and reality.
The report attributes this shortfall to unrealistic revenue assumptions, with many municipalities inflating their budgets to reflect surpluses not backed by actual cash flow. While this is a valid observation, it misses the more critical issue: the shortfall is as a result of a poor collection rate. This is a clear case of financial mismanagement. Municipalities have the legal authority to suspend services for non-payment, yet there appears to be a lack of political will to enforce these measures. The failure to act decisively against non-payers reflects a breakdown in governance and accountability.
Debt and Cash Flow Concerns
As a result of the poor revenue collections debt has ballooned. The amount consumers owe to municipalities keeps climbing, reaching R427.7 billion by the end of June 2025. Of this, a staggering R376.1 billion (87.9%) is older than 90 days, making it largely uncollectable. Households account for 71.9% of this debt, while government departments owe R24.7 billion (5.8%). The inability to recover these funds places further strain on municipal finances and their ability to survive.
Compounding the issue, 49 municipalities reported negative cash positions, up from 42 in the previous quarter. This trend signals growing liquidity risks and raises a red flag about the ability of municipalities to meet their short-term obligations.
Looking at the Debtors Age Analysis per province it shows the extent of the problem. We do need to unpack it slightly more as Gauteng with the biggest debtors’ book also bills the most.
To understand the extent of the problem in the respective provinces we have calculated their Debtors days ratio. It works out as follows:
- Eastern Cape – 286.65 days
- Free State – 577.28 days
- Gauteng – 249.85 days
- Kwazulu-Natal – 220.69 days
- Limpopo – 251.58 days
- Mpumalanga – 398.64 days
- Northern Cape – 453.08 days
- North West – 881.75 days
- Western Cape – 49.64 days
With the exception of the Western Cape all of the resulting ratios are totally shocking. Any business not collecting their debts would not remain in business for very long. Perhaps this is a clear indication why the Western Cape has been benefiting from semigration – and one has to ask are the people moving provinces those that are paying their share, or those that are not paying.
Expenditure Side
Municipalities collectively spent R597.2 billion, or 89.8% of their adjusted expenditure budgets of R665.5 billion. While this suggests relatively strong spending performance, the breakdown reveals deeper issues. Capital expenditure, vital for infrastructure development, was only 65.2% of the adjusted capital budget—indicating delays due to procurement bottlenecks and weak technical capacity.
It’s fair to argue that spending was constrained not by discipline, but by lack of available funds due to underbilling and non-collection. Despite this, the Auditor-General reported R261.4 billion in irregular expenditure and R7.4 billion in fruitless and wasteful expenditure. One can only imagine the scale of mismanagement if municipalities had more money to spend.
Conclusion
The collapse of local infrastructure is no mystery, it’s the result of systemic mismanagement, often driven by unqualified appointments and cadre deployment. Public service has, in many cases, become a vehicle for personal enrichment rather than community upliftment. It appears as if the Municipality have no idea of what they are trying to achieve on behalf of their residents and furthermore they don’t care.
At Magwitch, we believe that those who fail to meet their financial obligations to municipalities should not have a say in how those municipalities are run. Every debtor that is not in good standing should be flagged and excluded from voting in municipal elections. Those who pay should have a greater voice in how funds are allocated and how services delivered. We also feel that Corporates that pay a substantial portion of the municipal levies should also have a say and should have a representative that votes on their behalf. Would you feel that it is fair if your neighbour is not paying and yet you have to?
We have reached crises point and something is going to give if action is not taken soon, make sure you use your vote wisely and appoint people that are going to work on our behalf and run your municipality properly.
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