Assessing Financial Viability of City of Matlosana: case Study

Abstract

The City of Matlosana Municipality in the North-West Province, South Africa is one of the municipalities that were recently placed under administration due to failure in meeting its financial obligations. The purpose of this mini-dissertation is to assess the City of Matlosana's capability to meet its financial and South African Constitutional obligations, in particular assessing the financial viability of the municipality. Case study research design is used in this mini-dissertation. Data-collection tools include reviewing financial and non-financial reports and semi-structured interviews. The findings are presented in the form of graphs to demonstrate the major findings which are cash flow problems, non-payment of rates and services, and poor collection rates. The study makes recommendations on how this municipality could become financially viable. The mini-dissertation findings are that, without transfers from national and provincial government, City of Matlosana Municipality is unable to meet its financial and South African Constitutional obligations. The Municipality depends on national grants as stipulated in Section 152 (1) of the Constitution of the Republic of South Africa, Act 8 of 1996, wherein Local Government should ensure the provision of basic services to communities in a sustainable manner. The Constitution further states that a municipality must strive, within its financial and administrative capacity, to achieve its objectives. The study further established that, whilst there is legislation and structures to assist and direct municipalities, the City of Matlosana fails to collect rates and taxes from service users as required by its policies. The average collection rate was 16.6% during the period of study, which is from 2012 to 2016. The municipality has cash flow problems caused by non-payment of rates and services, poor collection rates and non-distribution of electricity in certain areas. Without sound financial management systems and lack of transfers from national and provincial government, the City of Matlosana municipality could be forced to discontinue their operations. The City of Matlosana is not self-sufficient and often relies on grants and transfers to satisfy their immediate short-term goal of providing basic services to their communities.