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SA municipality finances in the red

By Staff Writer
South Africa’s chartered accountants believe that more should be done to assist the country’s struggling municipalities with their finances, according to a new survey conducted by PPS.
 
Gerhard Joubert, head of group marketing and stakeholder relations at PPS, said there has been widespread concern about the state of finances at the country’s municipalities. 
 
Recent reports stated that South African consumers may start to feel the effects of reduced levels of service delivery and efficiency from their local municipalities.
 
Service delivery came under the spotlight last month when angry Cape Town residents dumped faeces at Cape Town International airport.
 
Their arrest resulted in a retaliation attack when a municipal car was set alight in Khayelitsha on Monday night(15 July 2013), allegedly by the group of the ‘poo protesters’ who were angry that seven of their accomplices were denied bail.
 
 “The South African Local Government Association (Salga) recently called for municipal heads to improve their financial management practices, advising that early warning systems must be urgently developed and implemented so that any weaknesses can be corrected timeously,” said Joubert.
 
This followed a decision by National Treasury to withhold funds from a number of provinces while their financial situation was being addressed.
 
“Concern over the state of municipal finances is unsurprising given that Auditor-General Terence Nombembe gave only three municipalities clean audits in his recent local government audit.

With the number of civil protests that continue to take place on a regular basis over service delivery and concerns about deteriorating infrastructure, it is critical that whatever measures and support can be given to municipalities to assist them in this regard is pursued with urgency,” said Joubert.
 
What does this mean for consumers?
 
Eyal Shevel, sector head of corporate ratings at Global Credit Ratings, said the impact of struggling municipalities could mean that consumers will experience problems with issues like potholes, streetlights and dirt collection.
 
“Financial constraints is definitely one of the problems causing these issues, but lack of capacity within the municipality and municipal entities not being managed properly has lead to wasteful expenditure,” said Shevel.
 
Municipalities also have a big provision for debt but there is also a low debt collection rate.
But according to Shevel they are trying to remedy the problem by hiring external debt collectors to pick up the slack.
 
“They are trying to be harder on consumers through debt collectors but there also has to be more efficiency within the municipality when it comes to sending consumers the correct rate amounts on time,”said Shevel.
 
Balancing the books
 
Willi Coates, head of marketing at the South African Institute of Chartered Accountants (SAICA), said the group has embarked on a project to assist municipalities to deliver clean audits. 
 
“Using the skills of some its members SAICA has focused on capacitating municipal financial management skills at municipal level as well as training unemployed graduates and placing them with municipalities in order to make a positive contribution to address our members concerns in this regard,” said Coates. 

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