Municipal Financial Viability and Sustainability in South Africa: A Case of Molemole Local Municipality, Limpopo Province, South Africa

17 May 2019

The purpose of the research is to determine if rural municipalities are financially viable and capable to sustain itself in the provision of services from the available financial resources. The study deployed both qualitative and quantitative method and research data was collected from the questionnaires, interview schedule, analysis of documents such as the municipal budgets, annual financial statements, auditor general reports, municipal annual reports, Provincial and national treasury reports as well as key observations during the data collection process. Financial viability is fundamental in the provision of services within local government on the basis that municipalities are substantially financed by means of own resources. However, the low rate of collection and unfavourable socio-economic conditions of households weaken the capability of municipalities to sustain themselves in the provision of services from the available financial resources. The study confirmed that service delivery in rural municipalities is below the accepted levels according to citizens’ expectations. The municipalities are providing basic services such as water, sanitation, refuse removal and electricity however community members are not satisfied with the level and quality of those services. Because citizens deemed the provision of these services as unsatisfactory and of poor quality, they have resorted in not paying for their municipal services. This non-payment of services by citizens, pose a huge challenge in a municipality to provide services in a sustainable manner. Non-payment of services also pose a threat on financial viability of the municipality because the municipality can’t recover any costs associated to the provision of services. Municipalities experience financial viability challenges that are perpetuated amongst others by operational issues such as financial management capacity within municipalities. Financial management capacity is dependent on factors such as, skills and competency levels of finance officials in relation to financial management practices and overall compliance to good governance. The capacity and expertise of officials dealing with revenue management contributes to the existing challenges of revenue management and collection because they are not providing any strategies to curb this existing revenue management and collection challenges. Households are the biggest contributor of municipal debts in rural municipalities. This is due to high level of indigents, high level of unemployment and culture of non-payment which make it difficult for municipalities to provide services in a sustainable manner. Household’s socio-economic challenges such as poverty and unemployment have a direct impact on payment of municipal services. These socio-economic challenges make consumers to struggle to pay their municipal accounts and depend on reliefs the municipality is providing for indigents. These reliefs are subsidized by the equitable share from the national government. Municipality continue to perform functions on behalf of other state institutions without any funds associated to them and such functions are not included in the powers and functions allocated to them by the constitution or any legislation. Such services included the libraries and licensing services and are exerting pressure on municipal budgets because municipalities perform them on behalf of the provincial government.