MIDVAAL Local Municipality in Meyerton, Gauteng, is listed as one of the two best financially performing municipalities in the country by Ratings Afrika’s annual Municipal Financial Sustainability Index (MFSI).
This is the second time in the row for Midvaal. The other municipality is Saldanha Bay in the Western Cape.
The MFSI is a scoring model that evaluates six financial components, namely the operating performance, liquidity management, debt governance, budget practices, affordability and infrastructure development of a municipality; and scores these components out of 100.
Ratings Afrika’s outcome was based after assessing 112 municipalities including the metro councils in the financial year which ended in June 2022.
In their report on performance of individual municipalities, analysts Leon Claassen and Charl Kocks said despite the poor performance of a number of municipalities, there were still a number of municipalities with sound financial management and dedication to maintain a high level of financial stability.
“For 2022, Midvaal and Saldanha Bay are the most financially sustainable municipalities, each with a score of 72. Only three other local municipalities achieved a score of 70 or more on the index. They are George with a score of 71, and Mossel Bay and Swartland (Malmesbury) each with a score of 70.”
The analysts said these high-scoring municipalities demonstrated consistency over five years, saying they normally had well-entrenched financial policies and their budgets were based on sound long-term financial strategies.
“They adhere to good budgetary practices, strict financial control and good revenue collection even through tough economic conditions. The sound levels of financial sustainability place these municipalities in a very strong position to invest in infrastructure and it gives them the capacity to absorb financial shocks,” the report said.
“Cape Town is the only metro that is still considered to be financially sustainable in 2022 with a score of 68, outperforming the rest of the metros by a large margin. Its achievement is remarkable considering the average of the metros is only 41 in 2022. Underpinning Cape Town’s high score is an operating surplus of R1.8 billion and cash reserves of R9.4 billion that can be utilised for infrastructure development and provide a considerable buffer to absorb financial shocks.”
Rand West Municipality in Randfontein and Westonaria was listed as among those municipalities with extremely low financial stability.
Mangaung and Tshwane in Gauteng were the lowest scoring metros, both with a score of only 24 in 2022.
“This is very concerning as it points to a situation where they are becoming dysfunctional. Mangaung realised an operating deficit of R1.9 billion while Tshwane’s deficit is R4.2 billion. Neither of them have the cash reserves to pay their service providers including Eskom and the water utilities as their liquidity deficits are R1 billion at Mangaung and R6.9 billion at Tshwane,” the analysts said.
Commenting on the outcome, Midvaal Local Municipality’s Mayor Peter Teixeira said: “The municipality will persist in its pursuit of financial excellence for the betterment of our residents.”