Tshwane finances on a sticky wicket
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Pretoria - The City of Tshwane's finances are in a precarious position, the newly released results of the financial census of municipalities for the municipal term ending last June show.
The metro is over-indebted so much that even if it was to sell all its assets it would still be unable to pay off its debts.
The census for the fiscal year ending last June was released by Statistician-General Dr Pali Lehohla in Pretoria on Wednesday.
In terms of the report, the City of Tshwane’s current ratio stands at 0.72:1 for last year, which is low compared to the 1.2:1 average for all municipalities.
The debt ratio is the extent to which assets provide cover to meet liabilities.
Compared to the current ratio of the metros in the country, which sits at 1.3:1, the City of Tshwane did not make the grade. The city’s ratio in 2014 stood at 0.79:1.
The acid test ratio measures an entity’s ability to use its short-term assets to cover its current liabilities without selling inventory.
The accepted acid test ratio is considered to be 1:1.
The City of Tshwane’s acid test ratio for 2015 is 0.65:1. Last year its acid test ratio was 0.73:1.
Compared to all the municipalities the city fell below the average, which stood at 1.1:1 for the year under review. The other metros stood at 1.2:1, which saw the City of Tshwane again falling short.
The City’s debt ratio is 1.3:1 for last year compared to 0.28:1 for all municipalities combined.
Last year the city’s debt ratio stood at 1.2:1. This means that the city’s debts exceed its assets. When compared to other metros, the city again fell short. The average for the metros is 0.39:1.
Nationally, some of the key findings of the report included that purchases of water had risen by 11%, sale of water is up by 10.1%. Purchases of electricity are up by 5.9% and sales 6.6%.
Employment-related costs increased by 6.4% while grants and subsidies are up by 6.5%.
Employee-related costs by municipalities rose by 43.9% from 2011 to last year.
Municipalities spent R73 billion last year on employee-related costs, which exclude the remuneration of boards of directors and councillors. In 2014 the amount was R68.6bn.
The total liabilities for municipalities amounts to R197bn, which grew from R177bn in 2014.
Another key finding was that for every R1 spent by municipalities, 25c was spent on salaries and wages and only 5c for maintenance of repairs and infrastructure.
Last week, the City of Tshwane was named the worst-performing metro in terms of maintenance of infrastructure in the 2016 State of the Cities Report. The municipality was one of nine surveyed by the South African Cities Network, which conducts surveys on the biggest cities in the country every five years.
“While there was a general decrease in maintenance of infrastructure in (the) nine cities between 2009 and 2014, Tshwane’s was the worst,” the report read.
In 2009, repairs and maintenance in the City of Tshwane made up 11.1% of operating expenditure. In 2014, this dropped to 6.5%. The report said that National Treasury recommends 8-10% of operating expenditure.
Buffalo City, Cape Town, Ekurhuleni, eThekwini, Johannesburg, Mangaung, Msundzi, Nelson Mandela Bay and Tshwane were the nine municipalities surveyed.
The auditor-general last month released the general report on the audit outcomes of local government.
The City of Tshwane received an unqualified audit report with findings and had higher than average irregular expenditure.