The National Treasury’s recent report on local government revenue and expenditure for the second quarter of the 2024/25 financial year casts a long shadow over the state of municipal governance in our nation. It reveals not just a snapshot of financial performance but a deeply entrenched and worsening cycle of cash flow struggles, poor delivery service, and a breakdown in the social contract between citizens and their local governments. This report should serve as a wake-up call, demanding urgent and comprehensive reform to salvage local government and restore its capacity to serve as a foundation for community well-being and development.
The Dismal Financial Landscape: A Litany of Underperformance
The headline figures from the National Treasury’s report are stark and deeply concerning. Aggregate spending by municipalities reached only 44.2% of their total adopted expenditure budget as of 31 December 2024. This indicates a severe lack of capacity to execute planned projects and deliver essential services. It suggests a combination of factors, including inefficient procurement processes, and a lack of skilled personnel to manage and implement budgets effectively. This may also include lack of employee engagement on the shop floor.
Capital expenditure, the lifeblood of infrastructure development and long-term growth, is even more dismal, crawling at a mere 18.4% of the adopted capital budget. This anemic investment in infrastructure has far-reaching consequences. It perpetuates a cycle of decay, hindering economic development, and diminishing the quality of life for residents. Roads crumble, water systems fail, and basic amenities remain out of reach for many communities.
On the revenue side, the picture is equally bleak. Aggregate billing and other revenue reached only 49.9% of the total adopted revenue budget. This shortfall points to systemic challenges in revenue collection, including inefficient billing systems, a lack of enforcement of payment, and a growing resistance among residents to pay for services they perceive as inadequate.
The Human Factor: Employees as the Linchpin of Service Delivery
It is imperative to recognise that at the heart of service delivery are the employees of the municipality. They are the cogs in the machine, the frontline workers who interact with citizens daily, and the managers who oversee operations. Their role is pivotal, and their buy-in into the local government’s programs is non-negotiable for success. This buy-in must be cultivated with a medium-to-long-term view that emphasizes the importance of consistent payment, strict compliance with regulations, and a customer-centric approach in all municipal activities.
Employees need to understand and internalise the vision of the municipality. They must be equipped with the skills, resources, and motivation to carry out their duties effectively. A well-trained, motivated, and customer-oriented workforce can significantly enhance service delivery, improve revenue collection, and foster a more positive relationship between the municipality and its constituents. Investing in employee development, promoting ethical conduct, and creating a supportive work environment are essential steps toward building a capable and committed municipal workforce. We need to start moving in this direction to encourage skilled and young people into local government, as the solutions will come from them.
The Vicious Cycle: Poor Service Delivery Breeds Non-Payment
The consequences of this financial underperformance and operational inefficiency are profound. It sets in motion a destructive cycle where poor service delivery fuels a growing resistance among residents to pay for those very services. Why should citizens pay their dues, they argue, when their streets are riddled with potholes, their taps run dry, and their refuse goes uncollected?
The National Treasury’s report confirms this grim reality. Aggregate municipal consumer debtors have surged to a staggering R405.1 billion, with household debt constituting the largest portion. This escalating debt underscores a breakdown in the social contract between municipalities and their constituents and poses a grave threat to the financial viability of local government.
This non-payment, whether due to genuine dissatisfaction or a culture of non-compliance, further cripples the municipality’s ability to provide services, perpetuating the cycle of decline. The municipality is then caught in a downward spiral, struggling to meet its obligations, maintain infrastructure, and deliver quality services.
Liquidity Crisis: The Inability to Meet Basic Obligations
Adding to the woes of municipalities is the growing liquidity crisis. The report reveals that the total creditors owed by municipalities have increased significantly, indicating that many municipalities are struggling to pay their bills. This inability to meet basic financial obligations is a red flag, signaling a severe cash flow problem and raising serious concerns about the financial sustainability of these institutions.
Provinces with the highest percentage of outstanding municipal creditors greater than 90 days include Mpumalanga, Free State, Northern Cape, and Limpopo. This suggests that the liquidity crisis is particularly acute in these regions, demanding urgent intervention and support.
Beyond the Numbers: The Human Cost of Municipal Failure
The statistics and financial ratios presented in the National Treasury’s report tell a story of systemic failure, but it is crucial to remember that behind these numbers are real people whose lives are directly affected by the performance – or lack thereof – of their local government. Poor service delivery has a devastating impact on communities, particularly the most vulnerable.
Lack of access to clean water and sanitation poses serious health risks. Inadequate waste management creates environmental hazards. Deteriorating infrastructure hinders economic opportunities and social development. When municipalities fail, it is the residents who bear the brunt of that failure.
Toward Solutions: Breaking the Cycle of Decline
Breaking this vicious cycle of financial distress and service delivery failure requires a multifaceted and comprehensive approach. There are no quick fixes or easy solutions, but a commitment to reform and a willingness to implement tough measures are essential.
- Strengthening Financial Management: Municipalities must prioritise improving their financial management practices. This includes implementing robust budgeting and planning processes, enhancing revenue collection mechanisms, and exercising strict control over expenditures.
- Investing in Infrastructure: Increased investment in infrastructure is critical to improve service delivery and stimulate economic growth. Municipalities need to develop long-term infrastructure plans and allocate sufficient resources for maintenance and development.
- Enhancing Governance and Accountability: Good governance and accountability are essential for building public trust and ensuring that resources are used effectively. This includes promoting transparency in decision-making, strengthening oversight mechanisms, and holding officials accountable for their actions.
- Empowering Employees: Investing in employee training and development, promoting ethical conduct, and fostering a customer-centric culture are crucial steps toward building a capable and committed municipal workforce. Employees must be empowered to deliver quality services and held accountable for their performance.
- Fostering Citizen Engagement: Citizen participation is vital for ensuring that municipalities are responsive to the needs of their communities. Municipalities should create platforms for meaningful engagement and solicit feedback from residents on service delivery and development priorities. This is also recognising that in 2025, there are multiple engagement platforms to engage with all citizens.
- Intergovernmental Support and Oversight: Provincial and national governments have a crucial role to play in supporting and overseeing local government. This includes providing technical assistance, monitoring performance, and intervening when necessary to address financial distress or governance failures.
The road to recovery will be long and challenging, but it is imperative that we act decisively and with a sense of urgency. The future of our communities, the well-being of our citizens, and the very foundation of our democracy depend on it. The National Treasury’s report provides a stark warning, but it also offers an opportunity to chart a new course for local government – a course that leads to improved financial sustainability, enhanced service delivery, and a renewed sense of trust and accountability.
