The State of Local Government Financial Management as at 30 June 2024

On an annual basis, the National Treasury publishes the State of Local Government Finances and Financial Management Report. The report is aligned with Section 5 of the Municipal Finance Management Act, 56 of 2003 (MFMA), which requires oversight of municipal financial management. The 2024 State of Local Government Finances and Financial Management Report use preset financial ratios and audited financial data to give a quantitative analysis of the financial health of the 257 municipalities. The primary source of information utilised in this report is the 2023/24 financial year's audited Annual Financial Statements (AFS) submitted by municipalities to the National Treasury’s Local Government Database and Reporting System (LGDRS) using the Municipal Standard Chart of Accounts (mSCOA) data strings. Some municipalities submit inconsistent information, which compromises the accuracy of the analysis and may significantly indicate that the data is not credible. Although municipalities were given the opportunity to verify the accuracy and consistency of financial information submitted to the LGDRS, there are still discrepancies between the data on the LGDRS system and the information in the audited annual financial statements. To assist municipalities in submitting credible mSCOA data strings, the National Treasury, together with Provincial Treasuries, has institutionalised the monthly analysis of submitted data. Feedback is provided to municipalities on identified misalignments to enable corrective action. In addition, technical support is offered through the Municipal Finance Improvement Programme (MFIP). Information obtained from the municipalities indicates that most of the senior municipal officials possess the prescribed minimum qualifications and relevant experience for their positions and have completed the required unit standards to meet minimum competency levels. The 2023/24 financial results show a slight improvement in the state of local government finances and financial management, as the number of municipalities in financial distress decreased from 168 in 2022/23 to 162 (4 per cent) in 2023/24. Despite this marginal improvement, the overall performance remains poor. The findings highlight persistent challenges, including the erosion of institutional capacity, weak financial management, and political instability, all of which continue to undermine effective governance.