Financial analysis of the capital debt funding facilities available to municipalities in South Africa

Abstract

The issue of service delivery in South Africa has been one of the main priorities for the post-apartheid government since 1994. Local government, through municipalities, has been tasked with the provision of services to citizens. In order to achieve this, the municipalities need to invest in massive infrastructure, both to address the infrastructure backlog inherited from under-investment in previously black communities as well as infrastructure to support economic growth and development across the full breath of the Republic. Based on the revenues available from own sources and intergovernmental transfers, municipalities are unable to meet their constitutional mandate and this creates an area of participation for the private sector. Access to capital markets becomes an important source of funding that municipalities, in addition to borrowing from financial institutions such as banks, should aggressively pursue. This is an area that the metropolitan municipalities in particular, should prioritise as they are in a better position to exploit, than the smaller and less-resources local municipalities. Government can then focus on finding innovative ways of reining in the local municipalities, in as far as accessing capital markets.