Western had the best province index. Photo: Facebook
DURBAN - The recent Municipal Financial Sustainability Index from Ratings Afrika has revealed the best and worst South African municipalities.

The report evaluates the financial standings of South Africa's 100 largest municipalities. Ratings Africa then gives them a rating based on their respective financial performances in the latest financial year.

The ratings come just after Parliament showed that 10 municipalities defaulted and they owned Eskom close to R10 billion. At the top of the list was Maluti A Phofung in the Free State who owed R2,8 billion to Eskom.

The report also assesses each municipality's operating performance, liability management, budget practices and liquidity position. After they are assessed they are scored out of 100.

The index revealed that a number of the municipalities are in financial trouble and they would need a government bailout of R22,4 billion to become financially stable again.

Below is a table with the profits, losses and state of liquidity for the various municipalities.

Province Operating profit Operating loss Liquidity surplus Liquidity deficit
Rm Rm Rm Rm
Eastern Cape 21 1092 341 830
Free State - 3094 - 7747
Gauteng - 1952 89 2585
KwaZulu-Natal 113 1757 1492 244
Limpopo 4 1644 551 619
Mpumalanga 96 2998 653 6215
Northern Cape 153 299 359 345
North West - 2262 435 3640
Western Cape 644 227 3094 136
Total 1032 15325 7014 22362

Across the eight big metros, only Cape Town and Tshwane had an operating profit of R3,36 billion and R730 million respectively. The rest had a total operating loss of R5,14 billion.

Best and worst performers

Western Cape kept their leading position for a second consecutive year in a row while KwaZulu-Natal was the only other province to score above 50. The Free State was the worst performers and they have been in that position since 2013/2014.

Below is a table with the index scores for each province

Province 2013 2014 2015 2016 2017
Eastern Cape 41 37 42 39 36
Free State 27 26 25 23 19
Gauteng 40 36 32 33 30
KwaZulu-Natal 58 58 62 56 54
Limpopo 44 52 44 41 42
Mpumalanga 30 27 30 28 28
Northern Cape 45 47 53 47 40
North West 33 29 26 29 23
Western Cape 47 52 58 59 62
National average 42 43 44 43 41

According to Ratings Afrika, only three municipalities scored above 80 a much lower number compared to the nine in 2012.

An article by Mossel Bay Advertiser stated that the Western Cape is the highest performing province with an average of 62. They are also the province that have shown the most improvement over the past 5 years.

Below is a table showing the best performing municipality in the respective nine provinces.

Province Municipality Score
Eastern Cape Senqu (Lady Grey) 79
Free State Metsimaholo (Sasolburg) 33
Gauteng Midvaal (Meyerton) 68
KwaZulu-Natal Greater Kokstad 76
Limpopo Fetakgomo Tubatse (Burgersfort) 61
Mpumalanga Steve Tshwete (Middelburg) 77
Northern Cape Sol Plaatjie (KImberley) 78
North West JB Marks (Potchefstroom) 78
Western Cape Mossel Bay and Swartland 84

This table shows the worst performing municipalities for each province.

Province Municipality Score
Eastern Cape Inxuba Yethemba (Cradock) 14
Free State Matjhabeng (Welkom) 9
Gauteng Emfuleni (Vereeniging) 17
KwaZulu-Natal Newcastle 21
Limpopo Modimolle (Nylstroom) 9
Mpumalanga Lekwa (Standerton) 9
Northern Cape Gamagara (Kathu) 24
North West Madibeng 6
Western Cape Kannaland (Ladysmith) 25

Ratings Afrika said that the municipal sector is currently in bad financial shape and significant political leadership correction is needed.

The Madibeng Municipality has the lowest rating form all on the provinces in the above table. According to Business Day, the second-quarter 2017-18 Section 71 Municipal Finance Management Act reports how that the municipality is one of many that owe creditors more than what they have in their coffers.

In January 2018, the Madibeng Municipality denied claims that they did not pay their employees salaries in time because of financial troubles according to Eyewitness News. The DA claimed that the municipality was unable to pay municipality salaries because of their financial problems. The DA also challenged a planned trip for the mayor and acting municipal manager. According to the DA the trip would cost taxpayers R1 million.

Tumelo Tshabalala the municipal spokesperson called the claims about the trip untrue. According to Tshabalala the trip only cost R53

Leon Claasen, a Ratings Afrika analyst said that business people who bid for government contracts should be informed that the weak financial stability of the municipality could indicate their inability to pay their suppliers in the 30 day time period as stated by legislation.



- BUSINESS REPORT ONLINE