A framework for enhancing -the management of municipal revenue and working capital in South Africa

Abstract

The purpose of this study is to design a framework for enhancing the management of municipal revenue and working capital in South Africa. In spite of , the municipalities having put in place credit control and debt collection guidelines as the management tools to assist them to collect all monies due to them in accordance with the Municipal Systems Act, 2000, many municipalities have experienced escalating and outstanding debt. Other municipalities have been indirectly declared technically insolvent, regardless of the implementation of credit control and debt collection policies in the municipalities. It is on this basis that the purpose of the study was to design a framework for enhancing management of municipal revenue and identifying the causes of failure of current credit control and debt collection policy and Municipal Systems Act, 2000 in terms of collecting all monies due to South African Municipalities. The study used a sequential exploratory design where 15 municipal finance managers were interviewed through in depth and focus group interviews. A total of 13 households and 2 organisations interacting with municipalities were incorporated to elicit their views on municipal governance through in depth interviews. Thematic analysis was used to identify the themes that emerged. The qualitative phase was followed by quantitative phase. During the quantitative phase, a questionnaire was used to collect data from households and municipalities participants. Three hundred questionnaires were sent to municipalities and two hundred and forty two questionnaires were returned. Another three hundred questionnaires were sent to the households and three hundred questionnaires were returned. The qualitative phase indicated that the municipalities lacked ICT system to improve revenue collection due to budget constraints they were subject to it; abuse of political power where the politicians instructed the municipal officials to relax internal controls to enforce the compliance of credit control and debt collection policy due to the next elections; incorrect billing; fraud and corruption by municipal officials who received bribes from households to reconnect the services without settling their accounts ; unwillingness of consumers to pay their accounts due to dissatisfaction with municipal services ; staff and skills associated with failure of debt control; illegal connection and faulty meters that compromised the implementation of credit control and debt collection policy. The quantitative phase depicted that the municipalities are subject to an ingrained culture of nonpayment, inadequate skills of municipal officials, including finance departments of municipalities, bribes, corruption and fraud on the municipal officials seeking the households to pay them so that they do not cut or restrict services even if the household accounts are unsettled. The recommendations with regard to the above findings were to propose for the implementation of the five-stage model for reducing lack of debt control within the municipalities. The five stage model comprised the systems reducing failure of debt control , management style dealing with failure of debt control, strategy implementation to control credit failures, strategy implementation: structure strategy to control credit failures and strategy implementation: structure strategy to control credit failures. The other recommendation is for the Government of South Africa to make amendments of the Municipal Systems Act, 2000, regarding the debt collection stages from the defaulters.