75% of SA municipalities unviable

South Africans, especially those in rural areas, should not expect an improvement in service delivery as the finances of their municipalities continue to deteriorate.

This is according to a study by the Human Sciences Research Council, which found two-thirds of South Africa’s 278 municipalities were under severe financial stress, with one-third of them financially unviable.

Writing in the latest edition of the HSRC Review, Professor Hendrick Kanyane said the unviable municipalities are found, mostly, in rural areas. He laid the blame at "the culture of non-payment of services, corruption in supply chain and weak accountability mechanisms."

Kanyane argues that, though the constitution says that all municipalities should self-finance, most rural councils use grants from national treasury and other loans as their main source of income.

"If the grants were withdrawn, most municipalities would stumble and ultimately crumble."

Municipalities’ failure to collect monies owed to them has also contributed to the problem, said Kanyane. "In many instances the revenue is only collected after a long time lag, if it is collected at all.

"This in itself shrinks the revenue base, and thus is a recipe for debt accumulation, which exposes the municipality to the potential risk of collapsing service delivery."

In June, the media reported that municipalities were owed R62-billion in unpaid rates and taxes. Kanyane said 17 municipalities in KwaZulu-Natal had no sources of revenue and were unable to deliver services.

"In the Eastern Cape, the financial viability of the Alfred Nzo and OR Tambo municipalities is a cause for concern. Only 11% and 19% of their respective total budgets constitute own revenues."

Professor Jaap de Visser, coordinator of the University of Cape Town’s local government project said: "It’s a very complicated problem. There is no silver bullet to it."

[date:] 2012-01-10

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