Municipalities in South Africa spent a total of R73,1 billion during the September quarter of 2016. Stats SA’s latest Quarterly Financial Statistics of Municipalities report1 provides an overview of how this money was spent.
More than half of municipal expenditure during the September 2016 quarter was on two items: electricity (28,0%) and employee-related costs (27,8%). The electricity trade in South Africa is an important source of income for local government, especially for urbanised municipalities.
Acting as intermediaries, these municipalities buy electricity from Eskom in bulk and then re-sell it to various customers (including residents, businesses and government). The surplus that they gain from this trade is used to finance some of their activities, and to offset losses in the provision of other services.
Rural municipalities, on the other hand, do not benefit as much from the sale of electricity as Eskom sells directly to consumers via retail shops (such as Spar or Shoprite, and some filling stations) in small towns.
The second largest item was employee-related costs. Local government employs about 270 000 people, according to Stats SA’s latest Non-financial Census of Municipalities report2. Employee-related costs contributed R20,3 billion to total expenditure in the quarter ended September.
General expenses, the third largest item, covers a range of costs including accommodation, travel, advertising, cleaning services, stationery, and telecommunication services; to name a few. If you take a few minutes to scan through Table 1 in the publication1, you will notice that the highest cost items under general expenditure were rebates for property rates (R1,6 billion), spending on consultancy fees (R569 million) and security services (R514 million).
Moving along in a clockwise direction in the expenditure pie above, the other major cost items for municipalities in the September 2016 quarter were on water purchases, depreciation, grants, financing bad debts and contracted services.
The other expenditure portion of the diagram includes items such as interest paid and remuneration of councillors.
1 For more information, download the latest Quarterly Financial Statistics of Municipalities (QFSM) report here. The latest report provides data on the quarter ending September 2016 (i.e. the months of July, August and September).
**The QFSM for September 2016 is based on the 257 municipalities, following the local government elections held in August (there were 278 municipalities prior to these elections).
** The QFSM for December 2016, due for release in March 2017, will see the introduction of seasonally adjusted values for municipality sales and purchases of water and electricity.
2 Download the Non-financial Census of Municipalities, 2015 report here.