South Africa’s 257 municipalities spent a total of R88,6 billion in the quarter ended June 2018, 18% more than the R75,1 billion spent during the quarter ended March 2018. Municipal revenue was down, however, falling by 6% over the same period, from R87,6 billion (March quarter) to R82,6 billion (June quarter).

Stats SA’s latest Quarterly financial statistics of municipalities report provides an updated breakdown of municipal expenditure and revenue. The largest expenditure item in the quarter ended June 2018 was employee-related costs, contributing R24,1 billion (or 27,2%) to total municipal spending. Many municipalities buy electricity from Eskom that they then resell to various customers. Municipal purchases of electricity was the second largest expenditure item, contributing R18,2 billion (or 20,6%) to total spending

In terms of revenue, the largest source was sales of electricity, followed by government grants and subsidies. Property rates contributed 19,0%. Other revenue (which consists of fines, licences and permits, interest received and rental of facilities and equipment, public contributions and donations) accounted for 9,3%.

The revenue items above can be grouped into two main categories: internally generated revenue as well as grants and subsidies from government. Internally generated revenue is money that municipalities generate themselves. This includes service charges (sales of water, electricity and gas, refuse removal and sewerage and sanitation charges), property rates (residential, commercial or business, state and other properties) and other revenue.

Internally generated sources contributed 76,5% to total municipal revenue for the quarter ended June 2018, while transfers from government accounted for the remaining 23,5%. Larger cities are able to supplement larger proportions of their budgets with internally generated revenue, while rural municipalities depend more on transfers (grants and subsidies). The eight metropolitan municipalities, for example, sourced 87,4% of their revenue from internally generated sources.

The total amount of internally generated revenue across all municipalities saw an increase in the quarter ended June 2018 compared with the quarter ended March 2018. Services charges increased from R38,6 billion to R39,9 billion over the same period.

As a source of revenue, grants and subsidies decreased by 22%, from R25,0 billion (March quarter) to R19,4 billion (June quarter).

For more information, download the latest Quarterly financial statistics of municipalities report here.

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