Municipal Finances

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The graphs below give an overview of expenditure in Gauteng municipalities between July 2006 and June 2011, for each financial year of the last municipal term of office.

The graph at the top allows the user to see, separately or in comparison, the total operating expenditure, total capital expenditure and total combined expenditure for each Gauteng metro, and for the combination of district and local municipalities in Metsweding, West Rand and Sedibeng.

The first four years of financial data are audited outcomes, as reported in the National Treasury’s Intergovernmental Fiscal Review of Local Government Budgets and Expenditure 2006/07 - 2012/13. The last year’s data, for 2010/11, comes from preliminary unaudited figures reported to National Treasury in August 2011 in terms of Section 71 of the Municipal Finance Management Act (MFMA).

The graph at the bottom shows two sets of indicators: ‘expenditure per capita’ and ‘expenditure as a percentage of GVA’, again for each municipality and for each of the last five financial years with an average across the period. Click on indicator to change what the graph shows. The default indicator showing at the start is 'total expenditure per capita'.

Population data is taken from Statistics South Africa’s mid-year population estimates for 2010, which included data broken down by metro and district areas across the country. GVA data is from Quantec, which provides GVA data per metro and district (unlike StatsSA whose annual release of GDP-Regional data only goes down to provincial level).

The comparisons presented in the graphs provide some fascinating insights.

• As might be expected, a straight comparison of municipal expenditure shows that the metropolitan municipalities dwarf the combined district and local municipalities in overall spend. On average across the five years the West Rand municipalities had a mere 10,7% of the total spending power of Johannesburg, and a mere 6,3% of its capital budget. The total spend in what was the Metsweding District Municipal area was only 4,7% of what was previously the Tswhane Metro, before the two areas were merged to form one new giant metropolitan municipality in May 2011. The capital expenditure in Metsweding municipalities was only slightly higher at 5,3% of what was previously Tshwane.

• In all the municipal areas capital expenditure peaked in 2008/09 and 2009/10, and then fell off drastically thereafter. This reflects two factors: the spending driven by the FIFA Soccer World Cup in June and July 2010 which then tailed off; and the heavy impact of the recession, which began to knock municipal revenue collection very severely around mid 2009.

• The vastly greater spending capacity of metros vis-à-vis the more peripheral municipalities in Gauteng is sometimes taken as an argument for measures to ensure fiscal equalization across the province, perhaps even through something so drastic as further mergers of municipalities. But the graph at the bottom presents some data that gives reason to pause. On a comparison of per capita spend, metropolitan municipalities still clearly spend more per person than do the municipalities in the more outlying areas, but the differential is far smaller than what one might have imagined from a straight comparison of total budgets (as in the top graph). So, for example, overall spend per person in the West Rand (at R 2 921) was just under half that of Johannesburg (R6 706) on average over the five years. But look closely at the capital expenditure data and see how:

1) Both Metsweding (at R531 per person) and Sedibeng (at R538 per person) were virtually indistinguishable from average spend in Ekurhuleni (at R583 per person).

2) In both 2009/10 (at R904) and 2010/11 (at R506) the per capita capital expenditure in Sedibeng was higher than in Ekurhuleni, at R651 and R496 for the two years respectively.

3) Remarkably, in 2007/08, capital spend in what was Metsweding (at R1 344 per person) was almost double that in the previous metropolitan area of Tshwane (at R784).

• The most interesting figures are those for spending as a percentage of gross value add (GVA). This is in essence an indication of (a) what size of municipal budget a local economy can support through municipal revenue collection efforts, and (b), from a different perspective, the relative contribution a municipality makes to the functioning of the local economy, either through its procurement of goods and services, or through providing and sustaining the infrastructure that economic activity requires as a base.

• The percentages across Gauteng are all fairly close, but it is remarkable that Sedibeng (at 10%) had on average, and indeed for most of the five years, the highest spend proportional to local economic value add of all municipalities. Also interesting was that total spend as a percentage of GVA was on average higher in the West Rand (at 8,6%) than in Tshwane (at 8,1%). One might be quick to judge that this is because of relative economic strength in the metropolitan core of the province, or that this is a clear indication that more peripheral municipalities are a greater burden on their local economies through excessive spending on operational activities. But consider the relative proportions of capital expenditure to GVA, the best indicator of what municipalities are putting back in to their local economies through essential infrastructure. At 1,3%, both Metsweding and Sedibeng have had a higher average capital expenditure to GVA over five years than Tshwane (at 1,2%) and Ekurhuleni (at a mere 1,0%)!

The conclusion must be that spend in peripheral areas is neither disturbingly below, nor excessively and wastefully above what it is in the metropolitan core of the province. Rather, in spite of what one might infer from a crude comparison of overall budgets, it is at a roughly appropriate level given the relative size of the population and economy in each area.