Financial performance of local government : evidence from South Africa

Maphalla, Shawn Thabo (2015-04)

Thesis (MDF)--Stellenbosch University, 2015.


ENGLISH ABSTRACT: Poor financial management and a lack of financial performance are some of the major challenges that affect local government in South Africa. This has raised concern with regard to the financial sustainability of local government in South Africa. Furthermore, the poor state of financials in local government has directly impacted the ability of local government to execute and deliver on its constitutional mandate to deliver basic public services and goods to local communities. The lack of service delivery by local government has since resulted in service delivery protests around the country which have often turned violent. The improvement of the financial function in local government is said to have the ability to improve the general functioning of local government and lead not only to the delivery of basic public services to communities but also facilitate development in those communities. Thus, the objective of this study was to analyse and determine the drivers of financial performance and financial sustainability of local government in South Africa. The data that was used for the study is from all 278 municipalities in South Africa for the year 2013/2014. The study used regression analysis (Chi-Squared) with financial distress (performance) as a dependent variable and the following as explanatory variables: Type of municipality, cash cover, cash balances, reliance on grants and transfers, overspending, underspending, debtor growth, debtors as a percentage of own revenue and capacity in the key positions of the municipality. The regression analysis was supported by a contingency table and decision tress. The results and findings of the study are consistent with literature and indicate that the type of municipality, the degree to which a municipality relies on government grants and transfers, the manner in which a municipality manages it debtors, cash, creditors, its spending (in comparison to its budgets) as well as the extent to which municipalities adhere to legislative compliance all affect financial performance in local government in South Africa.

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