SA’s municipalities improved their revenue collection in the nine months to end-March, but capital expenditure remains problematic, data from the National Treasury show.

In the local government revenue and expenditure report for the third quarter to end-March, the National Treasury said SA’s 278 municipalities increased revenue collection by 3.4%, or R9bn more than expected, mostly due to an overperformance by SA’s metros.

SA has eight metros, which saw revenue climb 7% or R11bn to end-March, with the amount they were owed falling R16.5bn quarter on quarter.

As of 2016, metros were home to 40% of South Africans, and responsible for 56% of municipal spending, according to Statistics SA.

SA’s secondary cities — which include Rustenburg, Nelspruit and Polokwane — however, saw revenue decline 8.5% year on year in the period to end-March, the Treasury said.

Overall, municipalities recorded an overperformance of 3.4%, or R8.9bn,  on revenue collection, but an underperformance of 3.9%, or R9.8bn, on operational expenditure.

Aggregate municipal consumer debts amounted to R162.9bn to end-March, an 11.8% decrease from the previous quarter.

The aggregate year-to-date actual collection rate is 87.9% compared with an adjusted budgeted collection rate of 89.1%. This represents an underperformance of 1.2 percentage points.

The metros budgeted for a collection of rate of 91.1%, and achieved an actual collection rate of 96.4%, but secondary cities underperformed, achieving only a rate of only 68%.

Secondary cities also underperformed in terms of capital expenditure, averaging only 44.6% of its yearly target.

Low capital spending has potentially serious implications for the government’s ability to meet the targets for expanded access to water, sanitation, electricity and job creation, the Treasury said.

Year-to-date expenditure by metros stood at 64.4% of their adjusted budgeted expenditure allocation of R255.9bn.

The report also included worrying statistics regarding municipal debts.

Municipalities in the Free State have the highest percentage of outstanding creditors whose payment is more than 90 days overdue, at 89.4%, followed by North West at 81.1%, the Treasury said.

“An increase in outstanding creditors could be an indication that municipalities are experiencing liquidity and cash challenges, and consequently are delaying the settlement of their outstanding accounts,” it said.

Municipalities also made marginal downward adjustments to the budgeted expenditure for salaries and wages during the period, from R113.6bn to R112.9bn.

Finance minister Tito Mboweni said in February that strict limits on compensation would be instituted over the next three years, with limits on overtime, bonuses and pay progression.

The Treasury has put limits on the rollover of funds, an issued decided upon in the third quarter. Municipalities had requested a rollover of R3.2bn in funds for the 2018/2019 financial year, but only R908m of this was approved.