Keeping a close eye on municipal finances takes a lot of work. One of Stats SA’s tasks is to compile statistics every quarter on the state of local government finances, from 257 municipalities across the country. Figures for the quarter ending December 2017 were recently released, providing an update on how municipalities spend their money.
Municipalities spent a total of R83,9 billion in the quarter ending December 2017 (i.e. the months of October, November and December). This is 12% higher than the R75,1 billion recorded in the quarter ending September 2017, according to Stats SA’s latest Quarterly financial statistics of municipalities report.
One of the major contributors to municipal spending is electricity. Acting as intermediaries, many municipalities buy electricity from Eskom in bulk and then re-sell it to residents, businesses and government.
A graph showing the value of electricity purchases over time reveals a regular pattern in municipal behaviour. Spending on electricity tends to rise in the quarter ending in June and peak in the quarter ending in September. Spending then eases off in the quarters ending in December and March. The reason for this is the change in seasons. During the coldest months, municipalities buy more electricity to meet rising demand.
The significance of electricity in local government spending is shown in the charts below. For every R100 spent by municipalities in the quarter ending December 2017, R19,60 was spent on purchasing electricity, making it the second largest expenditure item after employment costs.
The seasonal contrast in electricity is clear if we compare with the quarter ending September 2017 (i.e. the months of July, August and September). Electricity spending was more prominent during the colder months, with purchases of electricity taking up R27,50 for every R100 of total expenditure.
In terms of revenue, municipalities generated less in the quarter ending December 2017 compared with the quarter ending September 2017. Total revenue fell by R7,6 billion (-7,6%) from R100,1 billion to R92,5 billion. A decline in the amount of grants and subsidies from National Treasury was one of the contributors to this fall, but the more significant contributor was again electricity. Electricity sales fell with the onset of summer.
The largest contributor to total municipal revenue in the quarter ending December 2017 was grants and subsidies received (30,7%), followed by sales of electricity (26,2%).
For more information, download the latest Quarterly financial statistics of municipalities report here.
Similar thematic stories are available on the Stats SA website and can be accessed here.