The Cost of Creating a Compliant Municipal Billing Database
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Municipalities learn the hard way
The South African government is taking a holistic approach to cleaning up provincial government and municipalities with acts such as the MFMA and PFMA as well as the requirement that all public accounts be compliant with GRAP.
Some municipalities are falling short, others are taking on the challenge, and some of the larger municipalities are going to costly lengths to comply with national government’s demands.
Swellendam has been described as a “problem child” by provincial treasury head Harry Malila and falls in the top five of financially problematic municipalities in the Western Cape. The other four are Bitou, Kannaland, Saldanha Bay and Oudtshoorn. The municipality of Swellendam has been in disarray after their municipal manager was suspended in light of irregularities regarding the collection of property rates that were in contravention of the MPRA.
In the district of uMgungundlovu in KwaZulu-Natal municipal manager, Sbu Khuzwayo, has been lauded for taking an ailing municipality and turning it around. When he arrived in 2008 the municipal offices didn’t have a toilet, let alone a fax machine or telephone. In spite of this adversity and malicious service delivery protests, Khuzwayo has been able to find money in impossible places by thinking outside the box.
eThekwini Council are experiencing escalating costs in their attempts to introduce a billing system that is able to cope with their large client base. The eThekwini Council tried to implement a residential phasing in of its Revenue Management System in 2003. The original projections put the cost of the system at R90 million but this figure has been revised up to R485 million in February last year with the council missing the completion date of June 2011.
The City of Johannesburg is another major metro that is struggling to sort out its billing and finances. The DA recently said that the City only has 12 days' worth of cash cover in its bank account. The billing system has been in a process of improvement for the past thirteen years with a new IT system known as Project Phakama being introduced next year that will cost the city R500 million.
Why are municipalities forking out such large sums of money before genuine and verified clean data, compliance and improved revenue results are achieved? Surely contractual obligations and payments should be based on the quantum of actual, visible, monetary improvements? After all, what is the point of having clean data if it doesn't result in extra cash for improved service delivery?
According to Wanda Skerrett, CEO of Smart Metro "Our Smart Metro group of companies has globally proven systems and a track record that can make inconsistent data something of the past and revenue recovery the future for municipalities across South Africa. For municipalities who are under pressure from a cashflow perspective, we have a payment option where no money is paid up front and payment is only due once clean data is achieved and and extra revenue is flowing." If this kind of service is available, why would municipalities use valuable cash and capital resources when they can get clean data and compliance on a guaranteed positive cashflow basis?
Getting South African municipal finances in order does not need to further burden already strained municipal cashflows. By sheer will power and individual charisma some municipalities are turning the corner on their financial woes. However, this is more the exception than the rule and a calculated and proven approach is more likely to yield guaranteed results.
According to Skerrett "Municipalities can benefit from the Smart Metro's 30 year successful track record in transforming and monetising municipal data, uncovering new revenue streams while assisting with audit compliance. Industry knowledge is transferred into municipalities we work with to ensure the transformation is ongoing and sustainable, our Smart Metro team continues to guide the municipality for three to five years at no extra cost."
It looks like with the right municipal revenue enhancement partner, financial sustainability can become not just a dream, but a reality for municipalities throughout South Africa.
Date Posted: 2011-11-28
Posted By: SmartMetro
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