Many municipalities remain in dire financial straits, says the National Treasury. 

Its latest report on the state of local government, entitled ‘The State of Local Government and Financial Management 2017’, which was published this week, shows that 17 district municipalities were identified as being distressed in 2016/17, compared with the 16 municipalities identified as distressed in the prior year.

“It is cause for concern that district municipalities are financially distressed, given the role they have to play in empowering and capacitating local municipalities,” the report noted.

It further stated that the Auditor-General (AG) has highlighted the fact that municipal audit outcomes had shown little improvement.

“Recorded water and electricity losses remain high. There is ongoing instability in senior municipal management positions with an increase in the number of acting municipal managers and acting CFOs, and in both acting positions from 18% to 20%, which has a negative impact on service delivery to communities,” the Treasury report pointed out.

The report found that although 64 municipalities had negative cash balances as at June 30, 2017, none of the metropolitan municipalities had recorded negative cash balances in 2016/17.

“This is a strong indication that, in general, they have a solid cash base and comply with cash flow management procedures,” the report said. 


At an aggregate level, 74 municipalities in 2016/17 recorded cash coverage exceeding three months of operational expenditure, which was within the acceptable norm.

Of concern, however, was the fact that the number of municipalities with cash coverage of less than one month of operational expenditure increased from 116 in 2015/16 to 137 in 2016/17. 


The total number of municipalities that overspent on their operational budgets, however, decreased from 163 in 2015/16 to 33 in 2016/17, while the total number of municipalities that underspent on their capital budget by more than 30% increased from 90 in 2015/16 to 122 in 2016/17. 


At the end of the fourth quarter of 2016/17, total debtors amounted to R128.5-billion, a R14.9-billion increase from the 2015/16 financial year and total creditors amounted to R43.8-billion, a R4.9-billion increase from the 2015/16 financial year.

AG Kimi Makwetu will, on Wednesday, release the audit results of South Africa’s municipalities for 2016/17.