KwaDukuza municipality (KDM) is South Africa’s third most financially sustainable municipality, but what does that mean in practice?

In a report released by independent rating agency Ratings Afrika on June 3, KDM was listed as the best performing municipality in KwaZulu-Natal (KZN) and third countrywide with a score of 66 out of 100.

Only Midvaal in Gauteng (75) and Saldanha Bay in the Western Cape (72) received better ratings out of the 100 municipalities studied.

The report was welcomed by KDM mayor, Lindile Nhaca.

“It is clear that we have well entrenched financial policies, and our budget is based on sound financial planning. This alone is a confirmation of our commitment to adhering to good budgetary practices, strict financial controls and good revenue collection,” she said.

This rating is specifically linked to financial sustainability and does not take into account any other factors of municipal performance, such as service delivery for example.

The Courier spoke to Dolphin Coast Residents and Ratepayers Association (Docrra) chairman Deon Viljoen, to gain insight into the methodology behind the report.

“I want to congratulate the municipality for the score, which is a great achievement. But we also need to interrogate what this report is actually saying,” he said.

“The way this rating is calculated is by factoring in the ability of a municipality to continue its operations without any further revenue, essentially the cash reserves to fulfill a three-month going concern.

“KDM has a very reliable and functional ratepayer base, which means the municipality can budget for 90% of all rates to be collected every month.

“In actual fact, the rate collection is at over 95% in most months, which is incredibly high compared to other municipalities countrywide,” Viljoen said.

“Therefore, KDM is over collecting on rates compared to their budget estimate.

“Combine this over collection with the fact that KDM regularly underspends on its capital budget and service delivery, you can see how a cash surplus is created.”

Given that this has been the operating procedure for many years at the municipality, a huge cash reserve has developed.

It is anticipated the cash reserve will reach R1-billion in the next year.

Contrast this with KDM’s operating expenditure per month, which is around R140-million, or R420-million for the three-month going concern period.

For the purposes of the Ratings Afrika report, this reflects a financially stable position and is why KDM scored so well.

“Even after general accounting provisions, that means there is still between R200- and R300-million that is unallocated however,” said Viljoen.

“Although it is clear KDM is in a good position to have these reserves, we would like to see them used for service delivery issues.

“Residents do not pay their rates so that they can be held in reserve, they want to see action on the ground.”

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