Salaries take up bulk of municipal costs

Cape Town - Over a quarter of municipal expenditure in the 2014-’15 financial year went towards employee costs, according to the latest financial census of municipalities.

Statistician general Pali Lehohla released the various financial statistics on municipalities in South Africa, including income sources such as government grants, property rates and service charges, outlining how local government spent the money generated and received as grants and subsidies.

The figures for the period from 1 July 2014 to 30 June 2015 showed that 25.6% of expenditure was allocated for employee-related costs, which include salaries and benefits.

Expenditure on electricity purchases was the second highest (21.7%), while bad debt accounted for 7% and spending on maintenance and repairs was 5%.

On 30 June 2015, municipalities owed their suppliers and creditors R197bn – this was 11.6% more than in the previous year. Consumer debtors per province increased from R32m in the previous financial year to R35.1m in 2015.

Gauteng accounted for the largest amount of liabilities at R80bn, followed by KwaZulu-Natal at R32.3bn and then Cape Town at R30.1bn. In addition, Gauteng has the highest number of consumer debtors by province.

As for municipal operating income, electricity sales accounted for the bulk of source of revenue at 33.7% in metros, while district and local municipalities had to rely on grants and subsidies as their main sources of income.

In the period under review, grants and subsidies were responsible for 79.6% of the income of districts municipalities and 37.1% at local municipal level.

“Rural municipalities struggle to survive without grants and subsidies,” said Lehohla.

The acid-test ratio of all municipalities – a measure of their ability to use short-term assets to cover liabilities without having to sell assets – is currently 1.1: 1. “The accepted acid-test ratio is considered to be 1:1,” Lehohla said.

The census report also showed that municipalities had a current ratio of 1.2:1. The current ratio is a reflection of municipalities’ liquidity and measures their ability to pay short-term and long-term obligations by considering their total assets relative to their liabilities.