The gap between the best and the rest is widening – Ratings Afrika. From Moneyweb.
It comes as no surprise that South African municipal performance is abysmal overall, but can it get any worse?
Yes, it can – and according to the latest Ratings Afrika Municipal Financial Sustainability Index (MFSI), it has.
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A look inside SA’s best-run municipality
Coalitions and political appointees are hobbling municipalities
“The results of the latest MFSI once again confirm the very weak financial sustainability of South African municipalities under the leadership of the current elected councillors and their appointed executive management teams,” says governance rating agency Ratings Afrika.
“The exception is the majority of the Western Cape municipalities and Midvaal in Gauteng. Ratings Afrika has been warning of this disastrous trend since 2011.”
Residents and businesses are suffering from poor, and in some cases, almost non-existent service delivery.
Of the 107 municipalities measured, the average score is dismally low at 36 out of 100.
This has remained unchanged over the previous two years and, ironically, is propped up by the relatively strong performance of the Western Cape, with an average of 55 out of 100.
Read: Auditor-General’s war on waste and corruption yields R4.5bn
The index measures financial sustainability on a score of zero to 100, based on six underlying components: operating performance; liquidity management; debt governance; budget practices; affordability; and municipal infrastructure development.
Common thread among the best
Although not mentioned in the report, the Western Cape is predominantly run by the Democratic Alliance, as is Midvaal in Gauteng.
The DA’s political brand has benefitted from reports by Ratings Afrika and the Auditor-General SA showing clear daylight between it and other parties at local government level, and is no doubt a factor prompting former Cape Town mayor Helen Zille to throw her hat into the ring for mayorship of Joburg in 2026.
The Western Cape is the highest-scoring province and the only one considered as financially sustainable, says Ratings Afrika.
If we exclude the Western Cape municipalities, the average score for the rest of the country drops to 30 out of 100, which is a decline from 32 in 2023.
Common thread among the worst
A common feature of the municipalities with the lowest scores is that their liquidity positions are extremely weak, with operating revenue and expenditure not evenly matched, resulting in relatively large operating deficits.
“The quality of their infrastructure is deteriorating, caused by low spending on repairs and maintenance, which could threaten long-term service delivery and sustainability. The going-concern status of these municipalities is extremely doubtful.”
Metros are in decline
The average score for the metros shows a slight decline, from 43 in 2023 to 42 in 2024.
At this level of financial sustainability, the majority of the metros, except Cape Town, remain a concern, says the report.
Any failure in service delivery in these cities translates into serious damage to the overall SA economy.
Cape Town is the only metro still regarded as financially sustainable in 2024, with a score of 70, outperforming the rest of the metros by a large margin.
“Its achievement is remarkable, considering that the average of the metros is only 42 in 2024,” says Ratings Afrika.
Cape Town’s high score is underpinned by a sound operating surplus and strong cash reserves, which act as a buffer against financial shocks. Nelson Mandela Bay, with a score of 50, is the only other metro in any kind of reasonable shape.
New municipal award
There are some good news stories.
Ratings Afrika has partnered with the South African Property Owners Association (Sapoa) and the Banking Association of South Africa (Basa) to launch the Sapoa/Ratings Afrika Municipal Performance Award, with Saldanha Bay and Swartland municipalities coming in joint first place, each with a score of 74 out of 100, followed by Swellendam with 73 and Hessequa with 72.
Read: Sapoa launches SA’s first national municipal performance awards
These scores are based on consistent performance over five years. Each municipality has well-entrenched financial policies and budgets based on sound long-term financial strategies.
The dismal performance of most municipalities is an ongoing concern, with a disastrous effect on residents’ quality of life.
Unless there is a concerted effort – from the municipalities themselves, the provinces and national government – to strengthen their governance and financial management, this bad situation will continue, says Ratings Afrika.
“Service delivery will break down further, the quality of life for most residents will deteriorate, and economic activity will be stifled. The time to act is now!”
