“Cities are already operating in an unstable and difficult macro-economic environment, and this year have had to deal with the unexpected burden of Covid-19 and the associated lockdown, which has resulted in lower revenue and additional responsibilities and costs.”
THE COVID-19 pandemic has added more financial strain to metro-municipalities in South Africa that were already battling to generate enough revenue to provide service delivery.
The 2020 State of Cities Finance Report released by the SA Cities Network (SACN) this week showed that the cities’ finances status had worsened.
The biennial report examines the finances of nine metro municipalities: Joburg, Tshwane, Ekurhuleni, Nelson Mandela Bay, Cape Town, eThekwini, Buffalo City, Msunduzi and Mangaung.
SACN said the cities were finding it hard to raise sufficient revenue to cover their mandates as a result of structural issues within the local government fiscal framework (LGFF), and the deteriorating macro-economic environment in which they operate.
“Cities are already operating in an unstable and difficult macro-economic environment, and this year have had to deal with the unexpected burden of Covid-19 and the associated lockdown, which has resulted in lower revenue and additional responsibilities and costs,” says the report.
“The pandemic has thrown into sharp relief the systemic problems affecting the ability of cities to achieve the policy goals of developmental local government and spatial transformation.
“Just as the shock of Covid-19 has prompted many countries to re-examine the way in which societies are organised, it is perhaps time to review the way in which cities and other municipalities deliver on their constitutional mandate to provide services to communities in a sustainable manner.”
SACN, which releases the report once in two years, said since 2018, the economy has continued to perform poorly due to a myriad of challenges, including a decline in economic growth, unemployment, struggling state-owned enterprises and electricity supply shortages.
“More recently, the global shock, prompted by the Covid-19 pandemic and unprecedented lockdown, aimed at protecting public health, has led to a sharp contraction in the economy. As a result, economic growth is forecast to decrease by 7.2% in 2020. This economic downturn comes in a period of continued increases in fiscal risk,” the report says.
SACN programme manager Danga Mughogho said the increasing issue of raising revenue was also compounded by the public’s inability to pay for the cities’ services as many have lost their jobs, or had household incomes cut down.
“And while price increases have largely been driven by higher water charges, all services are not affordable for the poorest. As such, structuring and setting tariffs is a delicate balancing act,” said Mughogho.
City of Ekurhuleni spokesperson Zweli Dlamini echoed the report adding that the municipality was affected.
“The most affected area of our work is revenue collection. Although we had identified cash collection, account enquiries and billing as essential services, during the higher levels of lockdown, the City had to suspend certain revenue value chain services including credit control, disconnections and meter reading.
“The impact resulted in a drastic reduction of revenue collection; increase in accounts disputes;requests for new payment arrangements and extensions, among others.
“We further anticipate a leap in the number of indigent applications due to projected job losses and salary adjustments, and an increase in business rescue applications.
“The ultimate destination – at least a R1.2 billion revenue loss in the 2019/20 financial year,” said Dlamini.