Municipalities spent only 19.8%, or R66.7-billion, of the total adopted budget of R336.8-billion in the first three months of the municipal financial year ending June 30, 2015, while aggregate billing and other revenue over the period amounted to R80.7-billion – some 24.1% of the total adopted revenue budget of R335.7-billion, a report released by National Treasury on Wednesday has revealed. 

Elaborating on key trends over the three months, Treasury found that, in the period under review, capital expenditure (capex) amounted to R7.5-billion or 12% of the main capital budget of R62.5-billion, remaining consistent with the performance in the 2013/14 and 2014/15 fiscal years.

Of the operating expenditure budget amounting to R273.1-billion, R73.2-billion, or 26.2% was spent by September 30.

Monthly budgeted operational and capex projections submitted by all municipalities as supporting tables to the adopted budgets, indicated that there was an underperformance of 2.5% or R1.8-billion on revenue collection, 9.9%, or R6.6-billion, on operational expenditure and 30.6%, or R3.3-billion, on capex.

Focusing on the implementation of municipal budgets between July 1 and September 30, Treasury said in a statement that the in-year report enabled provincial and national government to exercise oversight over municipalities, identifying possible problems in implementing municipal budgets and conditional grants.

“In-year reporting is now well institutionalised, with most municipalities consistently producing quarterly financial reports. The reporting facilitates transparency, better in-year management as well as the oversight of budgets, making these reports management tools and early warning mechanisms for councils and officials to monitor and improve municipal performance,” it outlined.

The report further revealed that aggregated year-to-date expenditure reported by metropolitan municipalities (metros) amounted to R41.3-billion, or 21.1%, while the aggregated adopted capital budget for metros in the 2014/15 financial year was R34.6-billion, of which they spent 11.2%, or R3.9-billion.

When billed revenue was measured against their adopted budgets, the performance of metros showed surpluses across all four core services for the first quarter.

Water revenue billed was R4.9-billion against expenditure of R4.2-billion, electricity revenue billed was R17-billion against expenditure of R16.2-billion, the revenue billed for wastewater management was R2-billion against expenditure of R1.17 billion and levies for waste management billed were R1.7-billion against expenditure of R1.4-billion.

OUTSTANDING DEBT
Aggregate municipal consumer debts were R98-billion as at September 30, while the amount for outstanding debtors for government represented 5.6%, or R5.4-billion, of the total outstanding debtors.

The largest component related to households, which accounted for 58.6%, or R57.6-billion.

“It needs to be acknowledged that not all the outstanding debt of R98-billion is realistically collectable as these amounts are inclusive of debt older than 90 days,
interest on arrears and other recoveries,” the report read.

Metros were owed R54.7-billion in outstanding debt, which represented an increase of R4.9-billion, or 4%, from the first quarter of the 2013/14 financial year.

The City of Johannesburg was still owed the largest amount, at R17.5-billion, followed by the Ekurhuleni metro, at R10.6-billion, Cape Town, at R6.6-billion, and the City of Tshwane, at R6.5-billion.

The three Gauteng metros constituted 63% of the total debt owed to all eight metros across the country.

Households were reported to account for R30.6-billion, or 56.1%, of outstanding debt to metros, followed by businesses, which accounted for R15.4-billion, or 28%.

Debt owed by government agencies was about R1.5-billion, or 2.8%, of the total outstanding debt owed to metros.

BORROWINGS
The total balance on borrowing for all municipalities equated to R55.9-billion at the end of the first quarter. This included long-term loans of R35.7-billion, short-term marketable bonds of R4.1-billion and long-term marketable bonds of R14.2-billion. The balance represented other short- and long-term financing instruments.

Meanwhile, the total investments made by municipalities equated to R24.5-billion, which was R3.4-billion more than the R21.1-billion reported in the previous quarter.

Treasury added in the report that all municipalities were now required to report on their quarterly targets for service delivery with effect from July 1.

“This is a new requirement and the poor response is an indication that this reporting is not yet institutionalised as part of the Section 71 reporting framework. A concerted effort to collect the information from the metros and secondary cities has been made,” it noted in the report.

CONDITIONAL GRANTS
During the 2014/15 financial year, an amount of R32.9-billion was published as conditional transfers to the local sphere of government in the Division of Revenue Act.

Total conditional and unconditional allocation earmarked towards local government amounted to R98.5-billion, while R7.8-billion was transferred by the national departments administering the grants to municipalities in the first quarter.

According to expenditure reports provided by the national departments, 15.2% was spent against the direct conditional allocation by the end of the quarter.

Aggregated expenditure reported by municipalities for the three months was 16.5%, or R4.2-billion, of the R32.9-billion transferred to the local spheres of government.

“The first quarter reflects underperformance against the grant [allocation], since most municipalities have reported expenditure that is lower than 20% against the transferred funds.

“A number of factors contribute to the low performance, including delays in the implementation of projects, transfer delays owing to the late submission of business plans, late registration of projects, delays in the supply chain processes and a focus on last year’s unspent grants,” Treasury explained.