An Assessment of Local Government Revenues during Limited Economic Growth and a Constrained National Fiscus

The document examines the fiscal sustainability of South African municipalities during periods of economic instability. It finds that while municipal operating revenues show some resilience during extreme downturns, they are generally sensitive to economic declines, often with a time lag. The analysis highlights that national fiscal consolidation efforts since 2013 led to real declines in intergovernmental transfers, which significantly impacted municipal operating and capital revenues. Furthermore, the brief notes that economic shocks affect metropolitan and non-metropolitan areas asymmetrically, with metros experiencing higher growth in poverty levels despite generally faster economic growth. The author calls for a more integrated national strategy to protect local government during fiscal shifts and emphasizes the need for improved municipal financial reporting accuracy.

• Municipal operating revenues generally increase in nominal terms even during economic downturns, but real growth rates show a sensitivity to economic changes, often manifesting as a lag where a downturn in one year impacts revenues in the subsequent year.
• Property rates and service charges respond differently to economic stress; service charges are more sensitive to downturns because they are used across the income spectrum, whereas property rates act as a wealth tax and demonstrate greater resilience during extreme shifts like the COVID-19 pandemic.
• National government's shift toward fiscal consolidation starting around 2013 resulted in lower real growth and occasional negative real growth in both operating and capital grants for municipalities.
• Municipal capital financing is erratic and heavily dependent on intergovernmental transfers, as own revenue contributions and borrowing remained largely stagnant between 2009/10 and 2012/13.
• Economic impacts are asymmetric across regions; while metropolitan areas generally mirror national GVA growth more closely, they have experienced higher growth in the number of people living in poverty compared to non-metropolitan areas.
• There are significant issues with the quality of municipal financial data reported to the National Treasury, including reporting inconsistencies, under-reporting, and missing data, which hinder long-term trend analysis.

APA

J., M. (2023). An Assessment of Local Government Revenues during Limited Economic Growth and a Constrained National Fiscus. Public Affairs Research Institute. https://pari.org.za/wp-content/uploads/2023/12/Fiscal-policy-brief15-12-2359.pdf

Chicago

J., Mahabir,. An Assessment of Local Government Revenues during Limited Economic Growth and a Constrained National Fiscus. Public Affairs Research Institute, 2023. https://pari.org.za/wp-content/uploads/2023/12/Fiscal-policy-brief15-12-2359.pdf.

Wikipedia

{{cite report |last1=J. |first1=Mahabir, |title=An Assessment of Local Government Revenues during Limited Economic Growth and a Constrained National Fiscus |publisher=Public Affairs Research Institute |date=December 2023 |url=https://pari.org.za/wp-content/uploads/2023/12/Fiscal-policy-brief15-12-2359.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{j2023assessment, author = {J., Mahabir,}, title = {{An Assessment of Local Government Revenues during Limited Economic Growth and a Constrained National Fiscus}}, institution = {Public Affairs Research Institute}, year = {2023}, month = dec, url = {https://pari.org.za/wp-content/uploads/2023/12/Fiscal-policy-brief15-12-2359.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }