Analysis of Local Government Financial Performance: Evidence from South African Metropolitan Municipalities

This paper evaluates and analyses the financial performance of South African metropolitan municipalities. The municipality’s statement of financial position and statement of financial performance are used in the analysis. A case study research design was followed to evaluate municipalities’ financial performance using four criteria: cash solvency, budget solvency, long-term solvency, and service-level solvency. A quantitative research approach was adopted to evaluate the financial performance of the 2011 vs. 2016 local government administration. Eleven variables (ratios) were used to evaluate the municipalities’ financial statements from the four criteria. Emanating from the findings, the paper found that the financial performance of municipalities under the 2011 and 2016 administrations has been consistent. Only four of the eleven variables changed over time, resulting in long-term and service-level solvency. The paper found that municipalities’ performance has also been consistent in each of the four criteria, where when one Municipality performs best, they will be consistent in all variables in the specific category. For example, Buffalo City has the highest average ratios in the cash solvency analysis. The City of Tshwane was also consistent as a least-performing municipality as it had the lowest average ratios over the three variables used under cash solvency.