Assessing the financial viability of metropolitan municipalities in Gauteng

Abstract

Metropolitan municipalities in Gauteng have been plagued by poor service delivery in recent years. This has been the root of violent protests in most of the communities in this province. This article intends to explore the reasons for this by specifically focussing on assessing the financial viability of the three metropolitan municipalities in Gauteng, namely Ekurhuleni, City of Johannesburg and City of Tshwane, by means of ratio analysis. It is vital to have an understanding of the financial viability of municipalities as it can identify and address the problems related to poor service delivery. The following six ratios were used to determine the financial viability of the metropolitan municipalities in Gauteng: cash quick ratio, debt to asset ratio, ability to provide basic services ratio, percentage change in total assets, proportion of income from Government grant/subsidy, and consumer debt to total revenue ratio. The results of the group revealed improvements in certain areas and areas that need improvement. The group results were used as a benchmark for the three individual municipalities to assess whether they are performing above or below the group average. The results of individual metropolitan municipalities also revealed valuable information that these municipalities can use to formulate their intervention strategies.