Statistics SA is usually associated with the data it collects on the economy, demography, labour and social profiling.
However, a sizeable and important area of collection involves financial data in general and public financial statistics in particular. This includes information on capital expenditure in the public sector and financial statistics for national, provincial and local government.
The state of local government finances is of particular importance, given that this is the tier of government responsible for service delivery on the ground.
Since 2002 Stats SA has been undertaking an annual financial census of municipalities covering local, district and metropolitan municipalities. Its purpose is to provide information to researchers, policy makers, economists and other users for further analysis and assessment of the state of local government finances.
At the end of July, preliminary results of the 2005 financial census of municipalities were published. Information provided by municipalities (97 percent responded) was consolidated and presented at provincial level, although detailed information on each municipality is available from Stats SA.
The census found that there was an increase in overall purchases of water and electricity by municipalities between the 2004 and 2005 financial years. Purchases of water grew by 9.2 percent in that period, with electricity purchases by municipalities increasing by 6.5 percent. Municipalities in Gauteng are the biggest users of electricity and water, followed by those in KwaZulu-Natal and the Western Cape.
Revenue generated through sales of water and electricity by municipalities also increased between the 2004 and 2005 financial years (revenue from water sales grew by 14.2 percent and electricity sales by 8.2 percent). As with purchases, municipalities in Gauteng are the biggest sellers of water and electricity followed by those in KwaZulu-Natal and those in the Western Cape.
Levies received by district and metropolitan municipalities increased between 2004 and 2005 by 13.4 percent. The highest increase, 17.5 percent, was seen in the Northern Cape, followed by Mpumalanga with 16.5 percent. North West reflected the lowest increase in the receipt of levies (0.8 percent).
Assessment rates showed an increase of 16.6 percent over the two years in all provinces. Limpopo reflected the highest increase with 34.9 percent, followed by North West with 27 percent. The Eastern Cape was the lowest with 11.7 percent followed by Gauteng with 12.5 percent.
Assessment of the overall state of municipal finances is one of the key outcomes of this census. Two ratios are calculated in this assessment.
The acid test ratio, which is calculated as current assets minus inventory divided by current liabilities. This ratio indicates the institution's ability to meet its current obligations without disposing of its inventory. A ratio of 1:1 or higher is considered to be acceptable.
The current ratio, which is calculated as current assets divided by current liabilities. A ratio of 2:1 or higher is considered acceptable.
The acid test ratio for municipalities throughout South Africa was 1.8:1, and the current ratio 1.9:1. However, this fluctuated considerably when the ratio was broken down by province. Limpopo municipalities had the highest average acid test ratio of 3.8:1. Municipalities in KwaZulu-Natal had the lowest ratio (1.2:1), although this was still within an acceptable range.
Similarly, municipalities in Limpopo had the highest current ratio (3.8:1), while municipalities in Kwazulu-Natal had the lowest ratio (1.2:1 - below the acceptable ratio).
The census also measured the proportion of current expenditure each municipality spent on compensation of employees. Municipalities in the Northern Cape spent the largest proportion of total current expenditure on compensation of employees, (25.9 percent), while municipalities in the Western Cape spent the lowest proportion (21 percent). The proportion for the country overall was 22.9 percent.
Two other important indicators of the financial health of municipalities involve the number of days it takes for municipal trade debtors to settle what they owe to the municipality (accounts receivable) and the number of days its takes municipalities to settle what they owe to creditors (payable turnovers).
In the Northern Cape, it took 354 days for trade debtors to settle what they owed to municipalities - the longest period among the provinces. The lowest number of days was recorded by municipalities in Mpumalanga (119 days).
For accounts payable turnover, municipalities in Gauteng reflected the highest number of days to settle what they owed to creditors (237 days), while those in North West reflected the lowest number of days (69 days). For the whole country, it took on average 184 days for all municipalities to settle what was due by them to creditors.
Results from the latest financial census of municipalities suggest that, overall, the finances of South Africa's third tier of government are relatively sound.
However, consolidating municipal finances to provincial levels masks major differences in the finances of individual municipalities, and Stats SA will be producing a more detailed analysis of the data to facilitate both policy formulation and comparison of municipal financial health.