South Africa’s municipalities continue to grapple with mounting debt and underperformance in revenue collection, according to the latest National Treasury fourth-quarter Local Government Section 71 report for the 2024/25 financial year.
The report, released on Friday and covering the period ending 30 June 2025, shows that while municipalities collectively spent R597.2 billion, or 89.8% of their adjusted expenditure budgets, revenue collection fell short.
Municipalities billed and generated R617.3bn, equivalent to 93% of their adjusted revenue targets.
A major concern flagged by Treasury is the ballooning municipal consumer debt, which climbed to R427.7bn, up from R339.9bn in the same period last year. Households account for 71.9% (R307.5bn) of this debt, while government entities owe R24.7bn, a sharp increase from R18.6bn in 2023/24.
“The growing debt burden highlights the liquidity and cash flow challenges municipalities face, with nearly R376.1bn of the debt now older than 90 days and unlikely to be recovered,” Treasury noted.
Compounding the problem, 49 municipalities reported negative cash positions in the fourth quarter, up from 42 in the previous quarter. Municipalities also owed creditors R156.1bn, of which R113.6bn (72.8%) had been outstanding for over 90 days.
Provinces hardest hit include the Free State, where overdue creditors account for 93.5% of total municipal debt.
On expenditure, the report highlighted widespread underspending. Municipalities fell short of their combined budgets by R86.5bn, with capital spending at just 65.2% of the adjusted capital budget.
Conditional grants were also underspent, with municipalities using only 66.1% of the R43.2bn allocated, citing procurement delays and weak technical capacity as key hurdles.
Treasury warned that inflated revenue assumptions in municipal budgets continue to undermine financial stability, forcing councils to cut back on planned spending. Despite budgeting for an average 94.8% collection rate, municipalities achieved only 72.9%.
The report underscores the need for stronger financial management and improved accountability at local government level to ensure sustainability and service delivery.
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