Municipal finances in crisis: Johannesburg and Cape Town in historical comparison
It is widely acknowledged that the City of Johannesburg is in crisis (Harrison, et al. 2025). On an almost daily basis now, news articles and opinion pieces provide evidence of service delivery breakdowns, political and institutional dysfunction, and corruption, and in turn mounting community frustration. Frustration has led to communities choosing to fix service failings themselves rather than wait in vain for City maintenance, or taking to the streets in protest. In the second week of September 2025, the residents of Westbury, Coronationville and Ivory Park violently protested their neighbourhoods’ perennially dry taps as leaking infrastructure again failed to match water supply to rising summer demand (Evans, 2025).
While the fact of a crisis, and its symptoms, are plain for all to see, its precise contours, and its underlying causes and dynamics, are not fully visible. This interactive visualisation looks to shine more light on the mechanics of the crisis in the City of Johannesburg by comparing the state of its finances to that of the City of Cape Town for the period 2008/09 to 2025/26.
The data for the interactive graphs below has been assembled from the Annual Reports and audited Annual Financial Statements (AFS) for both the City of Johannesburg and the City of Cape Town for the financial years 2008/09 through 2023/241. All figures for these years are original budget, adjusted budgets and audited actual amounts as they appear in the AFSs. Where amounts have been restated for previous financial years, notably those that appear in the Summary of Financial Performance table in the AFS, these restated figures are used as the final and most historically accurate. For the financial years 2024/25 and 2025/26 the two Cities’ Annual Budget Book for 2025/26 provided the most recent as yet unaudited figures, and here the adjustment budget amounts were used in lieu of audited actuals. In some instances, as explained below, the Audited Financial Statements do not include crucial details, and so the analysis relied on the statements of prior-year audited figures as they appear in the Annual Budget Book.
Operating revenue
Municipal budgets are divided into two parts, operating budgets and capital budgets. Capital expenditure is money spent on developing new infrastructure such as water, electricity and local road networks. The money used for this capital expenditure comes in from loans raised or bonds issued, conditional grants provided by other spheres of government, and cash retained where operating revenue exceeds operating expenditure.
Operating expenditure includes employee costs; repairs and maintenance of infrastructure that has already been developed; purchases of electricity and water from bulk service providers such as Eskom and (in the case of Johannesburg) Rand Water2; the ‘finance costs’ of redeeming loans or bonds for infrastructure development; money set aside for bad debts resulting from consumers not paying for services consumed; and other more minor items. A municipality’s operating revenue is derived mainly from property taxes (rates); service charges – where residents, businesses and other spheres of government pay tariffs for services consumed – and an annual transfer from the national fiscus known as the equitable share of nationally raised revenue.
In municipal budgeting and accounting the money budgeted and actually raised for capital always precisely matches the expenditure. The trick is on the operating budget, where healthy finances require that a municipality (a) ensures that revenue projected is actually realised at the end of the year, (b) keeps expenditure tightly within budget, and (c) does not allow actual expenditure to exceed actual revenue, resulting in a deficit on the operating budget.
An accounting nuance here is that municipalities are required to report as operating revenue any grants provided by other spheres of government that are destined to be used for capital expenditure, but the revenue is only recognised at the point at which the funds have been spent as capital. In the overall Statements of Financial Performance that appear in the AFS, total operating revenue is counted as inclusive of capital transfers recognised. While this is proper accounting practice, these capital transfers recognised – having already been spent as part of the capital budget – do not actually cover operating expenditure, and so excluding them from the picture of operating revenue arguably gives a truer sense of the state of the municipality’s finances.
Figure 1 compares the budgeted and final actual operating revenue for the City of Johannesburg (CoJ) and the City of Cape Town (CCT) over the years 2008/09 to 2025/26, excluding capital transfers recognised. The figures are budgeted and audited actuals from the AFS, except for the last two financial years where the 2025/26 budget is used. An important note here is that the ‘actual revenue’ is revenue recognised as either received or owed by customers at the end of the financial year, not all revenue actually received on payment: some billings may not be realised and are eventually written off as bad-debts.
Three key points emerge from the figure. First, up until 2014/15 actual revenue recognised at the end of the financial year closely matched the original budgeted revenue in the City of Johannesburg. And in three of the six financial years audited actual revenue exceeded original budgets. Thereafter, actual revenue routinely dropped well below budgets (illustrated by the red shading between the budget and audited outcome lines). This suggests that prudent budgeting gave way to less realistic revenue expectations in the year before the 2016 municipal elections, with this situation worsening through the subsequent period of coalition governments. By contrast actual revenue exceeded budgeted revenue in almost every year in the City of Cape Town (as illustrated by the green shading between the budget and audited outcome lines), indicating far more credible budgets.
Second, revenue expectations were dramatically higher than actual in the years of the COVID-19 pandemic and the period of subsequent loadshedding. In 2021/22 the gap widened to R4,7 billion and stayed at R4,3 billion in 2022/23 . Indeed, a closer analysis (see figure x below) indicates that underperformance on energy revenue is the main cause of budget targets not being reached. This affected both cities but Johannesburg much more severely – in 2022/23 the gap between audited outcome and budget fell to less than a billion Rand in Cape Town, but nonetheless stayed positive.
Third, with loadshedding diminishing as a factor in 2023/24, actual revenues surged for Johannesburg. Yet it still remained below that anticipated for the year by over R4 billion. Revenue expectations were then significantly tempered in the financial year just concluded, increasing by only R1 billion between 2023/24 and 2024/25. While adjusted budgets project the final figures exceeding budget, it remains to be seen whether audited actuals see even these diminished expectations being realised. Incongruously, budgeted revenue has again spiked by almost R8,5 billion in the current 2025/26 financial year, raising questions about financial prudence in light of the historic trend, current economic conditions, and prevailing willingness of consumers to pay.
Figures 2 and 3 look at the main revenue sources of the two cities in more detail.
Figure 2 examines budgeted revenue from property rates for both Johannesburg and Cape Town over the period 2008/09 to 2025/26. Again, the figures to 2023/24 are from the audited financial statements and for the last two years projected from the current budget. Intriguingly, Johannesburg performs as well as, if not better than, Cape Town in budgeting accurately for this revenue stream. For the financial years 2020/21, 2021/22 and 2022/23 Cape Town saw audited actual revenue realised from property rates fall short of expectations by several hundred million Rand. By contrast, Johannesburg’s annual budgets for property rates have accurately predicted rates revenue recognised in most of the last fifteen financial years, and in a number of years the audited outcome has exceeded expectations. However, in comparative perspective, Johannesburg faces a major challenge with revenue projected from service charges, as shown in Figure 3.
Figure 3 shows clearly that actual service charges revenue matched original budget expectations by the City of Johannesburg until 2011/12. Following this, the audited outcome of revenue recognised at the end of the financial year began to fall further and further behind budget projections. It is noteworthy that the key change does not seem to have been an overoptimistic expectation in the original budget. That line seems consistent with previous years. Rather the widening gap is due to a falloff in revenue actually recognised. In 2017/18 the gap surged to almost R4 billion, and in both 2022/23 and 2023/24 it had grown to over R4,6 billion, primarily driven by South Africa’s loadshedding crisis. However, by contrast Cape Town’s budgeted and final actual recognised revenue have remained consistently close. Revenue recognised exceeded budgets in all years except 2016/17 and 2017/18, when Cape Town faced its Day Zero water crisis, and in 2022/23 when it too was clearly knocked by loadshedding.
What are the overall effects of successive years of lost revenue from service operations? Figure 4 compares the two cities on the cumulative impact of underrecovery. When each year’s gap between budgeted and audited actual revenue from rates and service charges is added up it is evident that Johannesburg was cumulatively short some R23,7 billion on what it had originally budgeted. By contrast Cape Town had cumulatively underrecovered just R29 million.
It also needs to be noted that this is not the full extent of the gap. Again, audited actual revenue recognised is not actual income received, since many consumers who have been billed for services received then fail to pay. At present the City of Johannesburg’s payment rate on rates and service charges stands at around 85%. So many billions more have been lost on bad debts.
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Operating expenditure
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Operating revenue vs expenditure
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Capital budgets
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Notes
- An earlier version of this analysis used data from South Africa’s National Treasury Municipal Finance Database (https://municipaldata.treasury.gov.za/), supplemented with the reports consolidated as excel files from data submitted by municipalities in terms of Section 71 of the Municipal Finance Management Act (MFMA) (Act 56 of 2003) (s71 reporting). However this data was not consistent with information appearing in the Annual Financial Statements of the two cities, and as of September 2025 was last updated for the 2022/23 financial year. Furthermore, at the time of writing, s71 reporting was not accessible on the National Treasury website. The analysis was therefore rebuilt using only data from the two Cities’ own reporting and budgets.
- Rand Water abstracts water from raw water sources, mainly the Vaal Dam, treats it, and sells it at a ‘bulk supply’ tariff to municipalities in Gauteng and across a wider supply area stretching beyond the provincial boundary. Municipalities then reticulate this water from their reservoirs to residents across their jurisdiction, ideally billing them for their consumption. Note that Cape Town does not have an equivalent bulk water supplier, and the municipality itself purifies the water it distributes to residents. Cape Town’s bulk service costs are therefore almost exclusively for electricity.
References
Evans, J (2025). ‘Scarily predictable’ — Joburg water crisis reaches boiling point as tyres burn and rubber bullets fly. The Daily Maverick, 11 September 2025. https://www.dailymaverick.co.za/article/2025-09-11-scarily-predictable-joburg-water-crisis-reaches-boiling-point-as-tyres-burn-and-rubber-bullets-fly/
Harrison, P., Gotz, G., Nunez Carrasco, L., Seedat, R. (2025). Johannesburg’s problems can be solved – but it’s a long journey to fix South Africa’s economic powerhouse. The Conversation Africa, 9 June 2025. https://theconversation.com/johannesburgs-problems-can-be-solved-but-its-a-long-journey-to-fix-south-africas-economic-powerhouse-256013?utm_source=clipboard&utm_medium=bylinecopy_url_button