FINANCE

Financial fitness

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A new South African Cities Network (SACN) report assessing the financial fitness of nine of the largest cities in South Africa has found cities are getting better at doing the basics right and have demonstrated consistent financial management improvements over the past 15 years. The cities’ revenues have held up remarkably well since the 2008 economic crisis, their billing is better than most other municipalities, and their audit outcomes continue to improve, the report states.

The cities under assessment are Johannesburg, Cape Town, eThekwini, Ekurhuleni, Tshwane, Nelson Mandela Bay, Buffalo City, Mangaung and Msunduzi. The combined population of these cities was 22 million in 2014, or 40% of South Africa’s total population. In these cities, more of the working age population is employed and the average per capital income is higher than in the rest of South Africa.

The State of City Finances Report 2015 – themed Basics + Innovation – is an eight chapter assessment exploring topics such as cities financial management, and innovation (finding new ways of expanding municipal revenues).

Some key findings in this new report are:

  • Seven out of the nine cities received unqualified audits in 2014. This is the best record to date across the cities.
  • Between 2009/10 and 2013/14, cities spent a combined R117-billion on capital-related projects. This is a significant level of investment and emphasises the important role the cities play in driving economic development.
  • However, according to the report, serious and notable challenges remain. According to the report, cities occupy an important place in South Africa’s social, economic and political landscape but are under extreme pressure from historical backlogs, increasing urbanisation (resulting in increased demand for service delivery), and the constraints of current municipal revenue models. Cities are also expected to take on additional (often unfunded) mandates as well as greater responsibility for the sustainability of their own finances.

“Cities have been unable to respond fast enough to the ever-growing pressures from their citizens, many of whom are poor and with limited access to resources. This has contributed to increasingly precarious conditions for urban dwellers, characterised by a majority being confined to poverty and informality,” says SACN CEO Sithole Mbanga.

Funding the expansion of cities is a global challenge. Like all municipalities (and nearly all governments around the world), cities would like to have access to additional revenues. Some of the recommendation the report puts forward include:

  1. Spend funds more efficiently by eliminating wasteful and irregular spending, which will result in direct savings that can be reallocated to fund necessary, priority services and infrastructure.
  2. Make better use of existing revenue sources by using the full range of own-revenue sources available to them, appropriately structuring service charges, tariffs and indigent policies, and checking that their billing systems are complete and up-to-date.
  3. Explore options for additional taxes and charges revenues in consultation with the Minister of Finance and the Minister of Cooperative Governance.
  4. Continue to argue for an increased equitable share from the national fiscus based on their ongoing development needs as a result of in-migration and on their importance to the national economy.
  5. Explore innovative financing options, such as using municipal bonds to invest in infrastructure developments that will grow their revenue base and thus contribute directly to increased future own revenues, and innovative property-related instruments.
  6. Lobby to have a stronger voice in government through direct representation in intergovernmental forums, especially those involved in the division of nationally collected revenues.

About South African Cities Network

SACN is a not-for-profit organization that identifies, collects and shares information that enhances the abilities of the cities’ decision-makers to learn from the experiences of others. SACN focuses on the full scope of the urban management process; promoting sustainable cities, economic growth and poverty reduction, urban renewal, good governance, integrated land management and service delivery and city development strategies. The Cities Network has members from the nine largest cities in the country including Buffalo City, eThekwini, Johannesburg, Mangaung, Msunduzi, Nelson Mandela Bay Metropole, City of Tshwane, Ekurhuleni.

 

 

 

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