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The 2023/24 MFMA report indicates that despite their constrained financial position, metros continued to incur financial losses through fruitless and wasteful expenditure, poor payment practices, overspending on projects, and water and electricity losses.

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Sizwe sama Yende

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Rating agencies are becoming more alarmed about the decline in municipal revenue collection which will cause metros to struggle to secure funding from capital markets.

The 2025 auditor-general’s report on municipalities indicated that Buffalo City, City of Ekurhuleni and eThekwini each had their credit rating downgraded by June 30, 2024.

Auditor-General Tsakani Maluleke has warned that more metros may face downgrades, leading to higher borrowing costs.

“This place more pressure on the public purse and affects metros’ access to additional funding for critical infrastructure projects that are essential for service delivery,” Maluleke said in her 2025 Municipal Finance Management Act (MFMA) report.

The report notes that poor budgeting processes resulted in unfunded budgets being approved by metro councils and financial recovery plans not yielding the desired results. 

City of Ekurhuleni and City of Tshwane adopted unfunded adjustments budgets – City of Tshwane has been adopting an unfunded adjustments budget for the past three years.

“As a result of the poor budget-monitoring processes, metros have disclosed a total of R14.62 billion in unauthorised expenditure since 2021-22, all of which related to overspending.”

The biggest contributors to unauthorised expenditure in 2023-24 were City of Johannesburg (R2.76 billion), City of Tshwane (R2.15 billion) and Nelson Mandela Bay (R1.44 billion). 

“These three metros also did not adequately budget for the impairment (writing down) of infrastructure assets and consumer debt (non-cash items) and, as a result, did not have funds to maintain and replace assets or to pay their creditors on time,” the report said.

Maluleke said that Buffalo City and Nelson Mandela Bay had a combined deficit of R489.86 million in 2023-24, as they spent more money than they had available.

At Buffalo City, the report notes, the revenue-collection rate declined due to factors such as high poverty and unemployment, poor billing practices, lack of debt-collection mechanisms and a culture of non-payment that was worsened by residents being unsatisfied with the quality of the services that they received. 

The metro had a debt-collection period of 151 days and has written down 65% of its debt as it may not be fully recoverable.

The City of Tshwane had a funding shortfall mainly due to insufficient revenue collection, which was driven by historically poor budgeting and financial management practices, particularly when it came to managing collections and creditor payments. 

The metro had a debt-collection period of 55 days and has written down 72% of its debt as it may not be fully recoverable. 

The report said that metros’ financial health concerns emanated from their continued display of poor revenue management and struggle to collect debt. 

By 2023/24 financial year-end, metros had written down a combined R118.64 billion in consumer debt, which they estimate they will not be able recover – 70% of the total municipal debtors’ book of R168.74 billion.

In 2023-24, Buffalo City, eThekwini and Nelson Mandela Bay made 30 prohibited awards worth R0,62 million through the quotation process to suppliers owned or managed by employees.

The following metros – City of Johannesburg, eThekwini, and Buffalo City - made prohibited awards worth R14,11 million to suppliers owned or managed by other state officials.

“The awards to suppliers in which close family members or business associates of employees or councillors have an interest are not prohibited, but such awards might create conflicts of interest and municipalities must disclose any such awards exceeding R2 000 in their financial statements.”

The report indicates that despite their constrained financial position, metros continued to incur financial losses through fruitless and wasteful expenditure, poor payment practices, overspending on projects, and water and electricity losses.

“Metros incurred fruitless and wasteful expenditure of R941.92 million in 2023-24, bringing the total of such expenditure since 2021-22 to R3.85 billion, with 57% of this amount being due to interest and penalties.”

The report said that the level of performance, accountability, transparency, institutional integrity, and institutional capability of metros differed, but they all face significant challenges, except City of Cape Town.

“Metros that are still struggling with the basics are Buffalo City, City of Tshwane, Mangaung and Nelson Mandela Bay. City of Ekurhuleni, City of Johannesburg and its municipal entities, and eThekwini have better institutional capability, but are not performing optimally – still allowing significant lapses in institutional integrity and accountability.”