[imagesource: David Ritchie]

Since the start of the pandemic, municipalities have been directed to take on a number of key roles in efforts to stop the spread of COVID-19.

They are required to help prevent the transmission of the virus by, among other things, providing water and sanitation services to their respective communities, including the delivery of potable water and proper sanitation to high population density suburbs, rural communities, and informal settlements.

They are also responsible for sanitising public areas, closing all non-essential facilities and places such as swimming pools, identifying and managing areas suitable for quarantine, and forming command councils to coordinate with provincial governments.

The above is a brief summary of a long list of requirements that municipalities are expected to meet to assist in limiting the spread of the virus, and highlights just how important well-run and efficient municipalities are in keeping the contagion under control.

Unfortunately, the words ‘well-run’ and ‘efficient’ couldn’t be applied to a number of South Africa’s municipalities long before we had COVID-19 to deal with.

This is evident in Ratings Afrika’s recently released Municipal Financial Sustainability Index (MFSI) for 2019.

The Citizen reports that the study looks at financial sustainability by measuring performance in six areas:

• Operating performance
• Liquidity management
• Debt governance
• Budget practices
• Affordability
• Infrastructure development

Taking these components into account, they allocate a score out of 100.

The Western Cape, described as “head and shoulders above the rest”, came out on top with an average score of 59, up from 58 in 2018. The best performing municipality in the province was Mossel Bay with a score of 76.

KwaZulu-Natal comes in with the second-highest score, at 41.

The weakest provinces are Free State and North West, with average scores in 2019 of 21 and 25 respectively. The majority, comprising 63 out of the top 100 municipalities, scored lower than 40.

Ratings Afrika analyst Leon Claassen says there are two overarching reasons for the Western Cape’s outperformance of other municipalities:

“Most of the Western Cape municipalities are under DA control, and the party has taken a firm political decision to impose strict financial control and good governance.”

“The second reason, flowing from this, is the Western Cape’s quality of management is overall better than rest of the country.”

As for the rest of the provinces, Claassen says that dire financial circumstances as a result of poor management and corruption in the ranks account for the failure of most other municipalities to meet the needs of their communities.

Most municipalities are commercially bankrupt (current liabilities exceed current assets), with insufficient liquidity to cover operating expenses.

Just 19 of 100 municipalities measured have operating surpluses. This is due in large part to an average collection rate of 82%, well short of the benchmark of 95%. Only the Western Cape, at 94%, is close to this target.

Narius Moloto, secretary-general of the National Council of Trade Unions (Nactu), says this has to do with the fact that most councils, despite collecting enough revenue to run operations, simply don’t use those funds where they’re needed.

As with all sectors of society, the pandemic has heavily impacted the municipal sector, which was already caving under the weight of financial downfall.

National government has allocated funding of R20 billion, of which a significant portion is to go towards free basic services and additional COVID-19-related costs.

Ratings Afrika predicts that this funding will be “hopelessly inadequate” to cover the loss of revenue in the sector, and a further R10 billion is estimated to be needed to cover the costs brought on by the pandemic.

The full extent of the financial damages as a result of the lockdown will only be fully apparent in a year or two.

As it stands, the Western Cape is the only province that looks to have anything close to the capacity to handle the financial fallout from the lockdown.

[source:citizen]