The National Treasury reports that, on aggregate, municipalities spent 21.5% (R111.9-billion) of the total adopted expenditure budget of R521.3-billion in the first quarter of the 2021/22 financial year ended September 30.
As for revenue, aggregate municipal billing and other revenue amounted to 25.3% (R130.6-billion) of the total adopted revenue budget of R516.7-billion, while 22.9% (R103.8-billion) of the adopted operating expenditure budget of R452.3-billion, was spent.
The Treasury also notes that municipalities have adopted the budget for salaries and wages expenditure at R138-billion, which is R11.5-billion more than the adopted budget of R126.5-billion reported for the first quarter of the 2021/22 municipal financial year. This constitutes 30.5% of their total adopted operational expenditure budget of R452.3-billion.
By the end of September, spending on salaries and wages was 21.6% (R29.8-billion).
Capital expenditure for the quarter amounted to 11.9% (R8.2-billion) of the adopted capital budget of R69-billion, while the aggregated year-to-date operating expenditure for metropolitan municipalities amounts to R64.8-billion (24.2%) of their adopted budget expenditure of R268-billion.
The aggregated adopted capital budget for metropolitan municipalities in the 2021/22 financial year is R34.4-billion, of which 7.6% (R2.6-billion) has been spent as at September 30.
However, the Treasury notes that, when billed revenue is measured against adopted budgets, the performance of metropolitan municipalities reflects a shortfall on electricity services for the first quarter of the 2021/22 financial year.
This does not take into account the collection rate of billed water revenue, which is R7.8-billion against expenditure of R7-billion; as well as energy sources revenue billed being R25.1-billion against expenditure of R25.2-billion.
It also does not account for the revenue billed for wastewater management, which is R2.5-billion against expenditure of R1.6-billion; and levies for waste management billed, which is R3.2-billion against expenditure of R2-billion.
Aggregate municipal consumer debts, meanwhile, increased from the R194.2-billion of the first quarter of 2020/21 financial year, to R264.7-billion for the period under review.
Government debt accounts for 7.4% (R19.6-billion), which is up from the R16.7-billion reported in the fourth quarter of the 2020/21 financial year. The largest component of this debt relates to households, which account for 70.5% (R186.6-billion).
In terms of debt owed to municipalities, the Treasury reports that metropolitan municipalities are owed R125.6-billion during the period under review, up from the R78.9-billion owed in the first quarter of the 2020/21 financial year.
The largest contributors were the cities of Johannesburg, which is owed R38.2-billion, Ekurhuleni R22.6-billion, Tshwane R17.1-billion, eThekwini R17.7-billion and Nelson Mandela Bay R10.4-billion.
Municipalities, however, owed their creditors R78.3-billion as at September 30, while provinces with the highest percentage of outstanding municipal creditors in the category greater than 90 days include the Free State at 90%, Mpumalanga at 82.7%, the Northern Cape at 82% and North West at 79.7%.
The Treasury suggests that an increase in outstanding creditors could be an indication that municipalities are experiencing liquidity and cash challenges and consequently are delaying the settlement of outstanding debt owed.
UPCOMING BUDGETS
The Treasury, on December 10, released the operating and capital budgets of municipalities, providing an overview of expected revenue and expenditure trends in local government over the next three years – referred to as the 2021/22 medium term revenue and expenditure framework (MTREF).
The aggregated budgeted revenue for the 2021/22 financial year is R489-billion, which is expected to increase to R517.7-billion in 2022/23 and R540.9-billion in 2023/24.
Total municipal expenditure in 2021/22 is estimated to be R521.3-billion, increasing to R547.9-billion in 2022/23 and R572.7-billion in 2023/24.
However, the Treasury notes that a net deficit of R4.6-billion is expected in the 2021/22 financial year. This is expected to be followed by a deficit of R2.9-billion in 2022/23 and R3.4-billion in 2023/24.
The Treasury also notes that municipalities will realise operating deficits on the aggregated operating budgets over the 2021/22 MTREF as the total operating expenditure increases at a higher rate than the revenue projections.
“This is an indication that municipalities are living beyond their means and a first sign of financial challenges,” says the Treasury in a statement.
The main cost drivers are employee-related costs and materials, and bulk purchases, representing 29.3% and 33% of the operating expenditure, respectively.
The Treasury says municipalities are experiencing a two-fold impact of high electricity and water tariff increases, lower sale levels owing to changes in consumption patterns and increased bad debt as a result of affordability pressures.