National Treasury finds in its latest 'Local government revenue and expenditure report' spanning July 1, 2024, to June 30, this year, that aggregate spending by municipalities was 89%, or R597-billion, of the total adjusted expenditure budget of R665-billion.

Aggregated billing and other revenue amounted to R617-billion, against a total adjusted revenue budget of R663-billion.

Capital expenditure was R51.1-billion, or 65%, of the adjusted capital budget of just under R80-billion.

The adjusted operating expenditure budget for local government was R585-billion in the period, of which R545-billion, or 93%, had been spent by June 30.

Treasury reports that municipalities adjusted their salaries and wages budget from R162-billion in the adopted budget to R161-billion in the adjusted budget for the 2024/25 financial year, representing a R1.4-billion, or 0.9%, decrease.

A total of 49 municipalities reported negative cash positions in the fourth quarter of the financial year, compared with 42 in the third quarter of the financial year.

Aggregate municipal consumer debts amounted to R427-billion in the fourth quarter of the reporting year, compared with R339-billion in the fourth quarter of the 2023/24 financial year.

The largest component of this debt relates to households and represents 72% or R307-billion.

In turn, government debt accounts for 5.8%, or R24.7-billion, of the total outstanding debtors. Included in the outstanding debt is an amount of R376-billion which is debt older than 90 days.

Total outstanding municipal creditors as at June 30 amounted to R156-billion, compared with R116-billion as at June 30, 2024, of which the majority, or 72%, has been outstanding for more than 90 days.

The provincial governments with the highest percentage of outstanding municipal creditors in the category greater than 90 days are the Free State at 93%, Northern Cape at 87% and Mpumalanga at 86%.

Treasury says an increase in outstanding creditors could be an indication that municipalities are experiencing liquidity and cash flow challenges and are, consequently, delaying the settlement of outstanding debt owed.

Moreover, analysis of the collection rates indicates that while municipalities have, on average, had an adjusted budget informed by a 94% collection rate, the aggregated actual collection performance against billed revenue is only 73%.

The metros budgeted for a 102% collection rate and collected only 71%.

The secondary cities budgeted billing was 86% and the actual collection was 72.8%.

Treasury finds a net underperformance against the budgeted revenue of R46.2-billion in the 2024/25 financial year, which means municipalities could not bill and generate the revenue that they budgeted for, which resulted in less funding available to cover the budgeted expenditure.

In aggregate, municipalities’ underspending of the total expenditure budget was R86-billion, or 13%, of their total adjusted budget.

A net total underspending of R68-billion of municipalities’ total adjusted expenditure budgets was reported.

Meanwhile, municipalities were allocated R43.2-billion of direct conditional grants in the year under review, of which R1.2-billion was not transferred ultimately, owing to late submissions of business and implementation plans or supply chain management challenges.

Municipalities’ underperformance in using capacity grants have created shortfalls across infrastructure development, capacity-building and other conditional grants as they serve a dual purpose of directly improving service delivery and promoting socioeconomic growth.

At the end of the fourth quarter, an amount of R2.3-billion was transferred for capacity grants and expenditure of 64.3% was reported by municipalities.