cities

• Bulk purchases (of water and electricity) as a percentage of city expenditure continued to grow,
and spending on repairs and maintenance remained inadequate.
• Employee costs increased, while capital expenditure declined. However, operating surpluses
remained relatively stable at about 5% of operating expenditure.
Key lessons:
Audit is a double-edged sword, as it may drive system improvements but can also result in a loss of
confidence and trust. Many municipalities and municipal entities are paralysed or slowed down by
fear of non-compliance and the administrative burden of increased risk management.
South Africa’s public finance management system
South Africa has a respected public finance management system. In 2008, the PEFA assessment of
South Africa’s public finance gave high scores for transparency, and fiscal discipline and control (PEFA
Secretariat, 2008). More recently, the PEFA methodology was used to evaluate the public financial
management system across all government spheres, i.e. national government, Gauteng province and
the three Gauteng metros. It found that “[b]udgets appear credible in national government, Gauteng
and the three metros, with only minor concerns about the forecasting of revenue” (SACN, 2015: 47).
The significant rate arrears in the three metros were being managed with appropriate provisions being
made, which may also be a sign that projections of revenue could be more accurate (SACN, 2015).
The municipal finance management system also contributed to the following country rankings in 2013:
• The Global Competitiveness Index of the World Economic Forum ranked South Africa 53 out of
148 countries. South Africa did well on measures of the quality of its institutions (41st) and the
high accountability of its private institutions (2nd).
• The World Bank/IFC’s Doing Business report ranked South Africa 39 out of 185 countries.
South Africa was a strong performer in terms of tax payments (32/185), but electricity supply
remained one of the country’s major weaknesses (150/185).
• The Emerging Markets Opportunity Index by Grant Thornton SA ranked South Africa 14 out of
26 countries. South Africa was the leading emerging economy in Africa and the only country on
the continent to be ranked in the top 15 worldwide.
• The Economic Freedom index, published by The Wall Street Journal and US think tank the
Heritage Foundation, ranked South Africa at 74 out of 177 countries. This index uses 10
benchmarks (including financial freedom, property rights, and freedom from corruption) to
measure the economic success of 179 countries.
However, the Corruption Perceptions Index (CPI) by Transparency International ranked South Africa 67 out
of 174 countries, with a score of 44, in 2014. The CPI measures the perceived level of public-sector
corruption in 174 countries and territories, and is a “survey of surveys”, based on expert and business
surveys. Countries are ranked on a scale of zero (perceived to be highly corrupt) to 100 (perceived as having
low levels of corruption). With a score below the 50 mark, South Africa is closer to the highly corrupt end of
the spectrum and performs more poorly than neighbouring countries like Botswana, Namibia, and Lesotho.
248 State of South African Cities Report 2016