An analysis by Daily Investor revealed that the Cape Town municipality has the healthiest financial situation, and Tshwane is the worst.
The analysis looked at the financial health of the Tshwane, Johannesburg, Cape Town, and Durban (eThekwini) municipalities.
Johannesburg generates the most revenue at R62.6 billion annually, and Tshwane generates the least at R40 billion.
However, revenue alone does not say much about a city’s financial health, as larger cities naturally generate more money.
For example, despite Tshwane’s R40 billion in revenue, it reported a whopping R2.1 billion deficit. All other municipalities managed to deliver a surplus over the same period.
When considering each municipality’s debt levels, Tshwane was again the worst performer.
Tshwane could only cover its interest expense on its debt 0.34 times with its operating surplus, while Cape Town could buy its interest expense 4.8 times with its operating surplus.
Tshwane was also the municipality with the highest debt levels, financing 46% of all its assets with debt. Cape Town has 20% more assets than Tshwane, and only 29% are financed by debt.
Cape Town is the best-performing municipality when looking at profitability. It has a surplus margin, commonly referred to as net profit, of 5.9%.
Tshwane, in comparison, has a surplus margin of -5.38% and is by far the worst-performing municipality based on profitability.
Cape Town also has very healthy liquidity. It can repay all its short-term liabilities 1.64 times with only its short-term assets.
It has healthy cash reserves and can repay almost 75% of its short-term liabilities using only its cash.
Tshwane could only repay 54% of its short-term liabilities with its short-term assets. Tshwane’s cash reserves are also shockingly low.
Municipalities’ financial health compared
The table below compares the core financial indicators of South Africa’s top municipalities – Cape Town, Johannesburg, Tshwane, and Durban (eThekwini).
The top figures are highlighted in green, and the worst are highlighted in red.