Abstract
Background: For municipalities to execute their service delivery mandate, financial resources are needed. However, there is a need for municipalities to effectively and efficiently manage revenues at their disposal. The article therefore argues that the management of public revenue is crucial to the provision of services in the Mtubatuba Local Municipality.
Aim: This article explores the challenges of public revenue management at Mtubatuba Local Municipality in KwaZulu-Natal, South Africa. This article provides insights into the challenges and effects of municipal revenue management at Mtubatuba Local Municipality.
Methods: This article employed a qualitative approach to explore the challenges faced by Mtubatuba Local Municipality in managing its revenues. The data were collected through in-depth interviews with 30 municipal officials. Purposive sampling was used to select the participants.
Results: The article found that there are several challenges that hinder effective revenue management in the municipality. These challenges include ineffective leadership, conflict of interest, non-payment, a lack of qualification, political interference, ineffective tax collection, corruption and misappropriation of municipal funds.
Conclusion: It is concluded that for municipality like Mtubatuba to deliver essential services to its citizen, management of financial resources is key and essential.
Contribution: This article adds to the ongoing debate on how municipalities could be capacitated to manage their meagre financial resources for service delivery. The article adds to the body of knowledge by recommending monitoring systems, formulating and executing conflict of interest rules, implementing strong anti-corruption policies, better communication with debtors, establishing clear job criteria and enhancing leadership competence.
Keywords: revenue; municipal revenue management; service delivery; corruption; mismanagement of financial resources; revenue enhancement.
Introduction and background
Since the emergence of the democratic era, several South African municipalities have experienced financial difficulty (Glasser & Wright 2020). Majali (2019) posits that one of the key financial difficulties involves an increase in municipal debt, underspending of grant allocations and insufficient tax collection across South Africa’s 257 municipalities. Nzama, Moloi and Marx (2023) identify significant issues in South Africa’s handling of assets, liabilities, expenditures and overall financial management. Similarly, the Auditor General South Africa (AGSA) 2022 report highlights these challenges, revealing that the majority of municipalities performed poorly in financial management, with only 41 out of 257 municipalities achieving clean audits. Mazibuko (2020) contends that these financial constraints have resulted to deterioration of infrastructure, poor service delivery and growing social isolation in many communities. However, Malobela (2016) argues that municipalities must continue to serve communities as required by the Republic of South Africa’s (1996) Constitution despite these difficulties.
The ability to collect money from residents is what distinguishes the services provided by local governments from a variety of services provided by the national government, also known as public services, which are entirely financed by the revenues of the citizens (Kelvin 2020). Municipalities have the power to generate local revenue for the delivery of essential services and the carrying out of additional tasks (Zondo 2018). These additional tasks that municipalities frequently undertake are economic development measures designed to promote local economies. These consist of workforce development programmes and infrastructure improvements, as well as disaster preparedness.
Municipalities are mandated to generate and manage their revenues to provide basic services (Moloto & Lethoko, 2018). This is because revenue management ensures that communities have the finances to maintain and improve basic services like water delivery, waste management and infrastructure development. There is an increasing demand on the local government in South Africa for greater service delivery and infrastructure (Ndlovu 2014). Because municipalities are authorised by law to raise taxes and charge for the services they render, financial viability is crucial (Moloto 2018). However, local governments are finding it hard to increase their revenue (Otchere-Ankrah 2021). According to Fourie and Havemann’s (2024) research, municipalities confront challenges such as rising debt, a culture of nonpayment for services and decreased capital spending. Mtubatuba Integrated Development Plan 2020–2021 has taken note of non-payment. Furthermore, a lack of competent people and political instability impedes their capacity to properly administer and collect money.
Many municipalities struggle financially and without the resources necessary to increase revenue and expand because their tariffs are set beneath cost-recovery levels (Jacob 2019). This circumstance inhibits municipality from meeting their operational costs, maintaining infrastructure and investing in advancements. As a result, they have challenges in expanding services and efficiently supporting community development.
Municipalities have enormous obstacles when trying to generate their own money for long-term service delivery, particularly in developing countries like Republic of South Africa (RSA) (Malobela 2016). Shava (2020) highlights that local administrations frequently face weak legal frameworks, weak economy which restrict capacity for tax collection. Moloto and Lethoko (2018) highlight that these difficulties are exacerbated by high rates of nonpayment for services and political instability, making it difficult for municipality to sustainably finance key services and infrastructure.
For municipalities to properly deliver services to people, a solid revenue foundation is essential (Tiwari 2017). Therefore, the management of revenue and spending has a significant impact on the success of the municipality (Manyake 2014). Optimising the management of municipal revenue is necessary (Mpongose 2018) because the majority of South African municipalities have suffered from uncollectable consumer debts over the past 10 years. Sikhosana (2021) claims that from 2013–2014 to 2017–2018, a large number of South African municipalities experienced financial health issues that raised questions about their viability, which had an immediate effect on service delivery to their residents. The analysis of local government financial performance in South African metropolitan municipalities by Nzama (2024) reveals that municipalities such as Mangaung, Buffalo City and City of Tshwane faced severe financial distress during this period.
Glasser and Wright (2020) note that unfavourable statistics from the Auditor General show that municipalities spent R2.07 billion in the 2018–2019 fiscal year on unnecessary and wasteful spending. General Auditor Tsakani Maluleke in her recent Public Finance Management Act (PFMA)-2021–2022 reports claims that due to the dire financial difficulties of 28% of municipalities, it is highly uncertain whether or not they will eventually be capable of continuing their activities. According to the Report on the Audit Outcomes of Local Government, published in 2011, municipalities are experiencing a financial crisis, while others are on the verge of collapsing. Data from the Auditor-General (2016–2017) revealed that local governments’ lack of accountability causes them to fail to meet their goals, which in turn impacts the lives of their constituents. The issues identified remain pertinent as they indicate ongoing financial health problems within South African municipalities. According to the AGSA report for 2022–2023, referenced by Matyana and Sibiya (2025), numerous municipalities continue to face challenges related to financial mismanagement, inadequate accountability and failures in service delivery.
Municipalities are nearing the brink of collapse without steady revenue reserves, while service delivery protests represent the condition of distress and inability to adequately handle issues with service delivery (Morutu 2017). This is also evident at Mtubatuba Local Municipality, the 2022–2023 Integrated Development Plan (IDP) report for Mtubatuba Local Municipality shows that the municipality has serious financial issues, making it more difficult for it to carry out its obligations and responsibilities successfully and promptly. Asset management, metre readings, credit and data collecting, user fees and tariff management are all potential ways to increase municipal revenues (Matyana & Mthethwa 2022). The Auditor-General, Kimi Maketu emphasised that the majority of municipalities’ financial stability was in bad shape (Malobela 2016). The issue is that the majority of the municipalities cited spending more than they had available, which resulted in deficits (Goto, Sekgetle & Kuramoto 2021). Most South African municipalities exhibit debts exceeding R1 million and more than 90 days late. Additionally, 54 municipalities exhibit operating deficits greater than 5% of total direct revenue, whereas 146 towns have issues with their financial accounts (Glasser & Wright 2020). Similar to Mtubatuba Local Municipality, Khuzwayo and Mchunu (2024) highlight that Mtubatuba has been settled under administration many times owing to financial mismanagement. Given that governments are required to provide excellent services to the public, which can only be done with effective revenue management there is a dilemma (Selby 2018). To encourage the community to embrace paying rates and prevent consumer debts that put pressure on municipal finances, revenue collection must be appropriate to the service provided (Shava 2020). It is against this brief background that this study examines the role and effects of public revenue management on service delivery at Mtubatuba Local Municipality.
It is against this background that this article determines the challenges faced by Mtubatuba Local Municipality in effectively managing its revenues. The first section of this article lays the conceptual framework on municipal revenue management and service delivery. The second section provided the literature review pertaining to key variables of the article. While the third section dwells on the theoretical framework on the ability-to-pay theory. In the fourth section, the article provides the research methodology used to solicit the empirical data. The fifth section deliberates on the findings and analysis. Finally, the article provides recommendation to address the challenges facing municipal revenue management at Mtubatuba Local Municipality.
Literature review
Public revenue management
According to Zondo (2018), public revenue management is the management of all revenue and income received by a public authority at any one moment. The National Treasury (2020) defines revenue management as all of the operations necessary to ensure that a municipality’s profits are successfully handled and thoroughly recorded, as well as receiving cash swiftly, safeguarding it, and depositing it. Mpungose (2018) alludes that revenue management refers to how municipalities and government organisations prepare and account for funds generated by promptly securing and banking them. For example, a study conducted by Katongole (2021) on local revenue management and service delivery in Ugandan municipalities shows that revenue management dates back to the early 18th and late 19th centuries and was essential given that more taxes were soon requisite to fulfil the government’s financial obligations, raising concerns about how those funds were managed. This is consistent with Nkabane (2019), who emphasises the need for revenue management in sustaining sustainability and controlling municipal finances. Poor revenue management has a detrimental impact on community service delivery. This includes irregular spending, which has significantly impacted Mtubatuba Local Municipality’s ability to provide essential services. The Mtubatuba Auditor-General report (2022) rumoured irregular expenditures of 255.99 m in 2022 and 232.09 m in 2021 which have strained the municipality’s financial resources, leading to budget deficits and reduced funding for critical services such as water supply, waste management and infrastructure maintenance. Issues with public income management cause financial difficulties in local government (National Treasury 2020).
Municipal service delivery
Ragolane (2022) points out that municipality service delivery is the act of providing residents with critical services such as dependable access to clean water, electricity, health care and roads. Shittu (2020) defines public service delivery as the degree to which the general public sector’s services meet or surpass the needs of individuals who utilise them. Municipalities, like every other organisation, exist to deliver necessary services to the general population (Cecilia 2020). For Zondo (2018), municipalities are like any other organisation whose primary objective is to offer important services to the people.
Governments that receive money from the labour force are normally responsible for delivering such services to people. The study conducted at Mtubatuba on economic development through the local informal economy in sustaining livelihoods by Khumalo, Mthuli and Singh (2019) contends that the municipality has the authority to offer vital services to residents and improve their quality of life. This is consistent with the Municipal Finance Management Act (2003), which declares that local governments have to supply services such as electricity, cleaning the streets, educational facilities and medical services to the people who live under their oversight, and have the capacity to tax people or make sure appropriate and viable management for the financial affairs of municipalities and other institutions in the local sphere of government.
Section 153 of the constitution states that a municipality shall organise and manage its administrative, planning and budgeting procedures to prioritise the community’s essential requirements and improve the nation’s social and economic development (Constitution 1996). It is consequently necessary to adjust service delivery to the demands of the end customers. This argues that when municipalities give services to their constituents, such services should be tailored to the needs of the local people (Mamokhere, Mabebaand and Kgobe 2022). Cecilia (2020) posits that service provision should not be based on municipal officials’ decisions; however, in recent years, the question of how to provide an appropriate degree of municipal services to people with limited incomes at a reasonable price has beset municipal finance.
Challenges of public revenue management
South African municipalities are confronted with various challenges that undermine their capacity to deliver services (Ndlovu 2014). Similar to Mtubatuba Local Municipality, Khuzwayo and Mchunu (2024) highlight that Mtubatuba has been settled under administration many times owing to financial mismanagement, political instability and poor service delivery. In particular, for the effective and efficient management of municipal revenue, there is a lack of expertise among municipal officials. The Municipal Systems Act of 2000 gave municipalities the right and authority to create credit management and debt collection rules for money owed to them, and the municipality property rates have not prevented this from happening (Mpongose 2018). Peters (2011) states that municipalities need to be able to collect payments for the services they give to the local communities and expand their sources of income. The provision of services to local government areas may be jeopardised if municipal money is not generated (Thwala 2022). A study conducted by Mpongose (2018) found that most respondents indicated that poverty was to blame for their failure to pay their bills, inaccurate invoicing, infrequent meter readings, expensive accounts, and continually rising rates and levies.
Moloto (2018) argues that the ability to handle finances effectively depends on several variables, including the expertise and skill levels of finance officials in financial management procedures and overall adherence to good governance. This claim is reinforced by Reddy (2016) who states that the absence of appropriate institutional competence is frequently regarded as one of the primary causes of subpar municipal efficiency and that it has a negative impact on the promotion of good governance. Tsheletsane and Fourie (2014) assert that the resignation rate of accounting officers is one issue preventing municipalities from implementing good fiscal management. Makwetu (2017) notes that there is a demand for qualified personnel in many municipalities who can effectively manage revenue.
Masiya, Davids, and Mangai (2019) observe that staff members in municipalities lack the necessary capacity to carry out their responsibilities. Programmes for skill development were insufficient, and institutional management was poor. It was also evident that employee skills building received either insufficient or no funding in municipal budgets (Beyers 2016). According to the South African Municipal Systems Act (2000), local municipalities are in charge of identifying, acquiring, recruiting, and retaining the talents and skills necessary for the effective delivery of municipal services (Mvuyana, Biyela & Ndlovu 2021). However, Ndevu and Muller (2018) identified inappropriate management training, sparing use of competency assessment techniques in hiring, and senior managers who are not rotated to guarantee exposure to all service delivery components as some of the problems that can be found resulting in ineffective revenue management in municipalities.
Theoretical frameworks: Ability-to-pay theory
The ability-to-pay concept holds that taxes should be assessed based on one’s ability to pay. This indicates that higher incomes and richer persons pay greater tax rates than those with lower or moderate incomes. In the view of Chauke, Sebola and Mathebula (2016), the ability-to-pay approach states that each person ought to contribute taxes in proportion to his or her ability to pay to cover the cost of governmental expenses. Babatunde, Ibukun and Oyeyemi (2017) posit that the ability-to-pay theory maintains that each person should pay taxes by his or her capacity to pay to cover the cost of governmental expenses. Tee, Boadi and Opoku (2016) argue that those with greater earnings should contribute more to taxes than those with lower incomes. According to Tekalegn and Wodwossen (2022), the concept states that taxes due by an organisation should be based on the amount of money earned by individuals and corporations via their operations. The ability-to-pay concept implies that each group should contribute to paying universal requirements by its financial capabilities.
This theory is significant because assessing taxes based on an individual’s taxable ability appears more equitable and acceptable (Babatunde, Ibukun & Oyeyemi 2017). The principle suggests that taxes should be paid based on income generation, promoting social justice by distinguishing between horizontal and vertical equity principles. This approach discourages tax evasion and makes everyone personally responsible for their tax obligations (Koritnik & Podlipnik 2017). The ability-to-pay argument suggests that individuals with low salaries require every penny of their income, and lower tax rates help maintain a higher percentage, boosting the economy and revenue collection (Schwarz 2017).
Gatmaytan (2022) criticises the ability-to-pay principle as it decreases motivation to work due to higher taxation percentages. It is argued that individuals with higher earnings should contribute more taxes than those with lower incomes. Villaroman (2017) advocates for fair tax levies and collections, while Ojuma (2020) advocates for equal distribution of taxes among taxpayers, allowing marginal beneficial sacrifice for both individuals and enterprises. For Omodero and Ogbonnaya (2018), the quantity of gathered money and inherited wealth is also seen as a key predictor of one’s ability to pay; nevertheless, this is a problematic guiding concept because not all property will provide revenue. According to this theory, taxes should be distributed depending on taxpayers’ capacity to pay a specified amount of tax and their financial position. According to statistics cited in the Mtubatuba 2018–2019 IDP report, 32% of households in the Mtubatuba Municipality are employed, compared to 10% of households without jobs. Based on this premise and the findings of the IDP study, it appears that some individuals are not working. People who are working and can afford to pay should pay in accordance with the theory. Mpofu (2022) contends that taxes should be determined by a taxpayer’s ability to pay. A study done by McGee (2023) found that the ability-to-pay theory is the most applicable to South African municipalities because ratepayers have the means to pay their taxes and rates, regardless of the advantages they receive from municipalities in terms of services provided.
Ironically, the Mtubatuba second Quarterly Performance Report 2021–2022 confirms that citizen non-payment for provided services has a detrimental impact on the management of revenue. According to Zondo (2018), various socioeconomic issues, particularly high rates of poverty and unemployment, endanger towns’ financial survival. Mtubatuba Municipality’s second Quarterly Performance Report 2021–2022 found that 10% of families are unemployed, while 32% are employed. The fact that more than 51% of households are not economically engaged and just 6% are discouraged from working is concerning. It is consequently vital to consider citizens’ capacity to pay for services delivered to them. As a result, the researcher employs the theory that supports the study to establish a theoretical foundation for the research.
Background of the study site
The municipality of Mtubatuba is located north of Richards Bay and in the North-East of the province of KwaZulu-Natal (Khuzwayo 2020). Mtubatuba’s origins can be traced to the name of the Inkosi of Mkhwanazi tribal authority. It is under the Umkhanyakude District Municipality. Mtubatuba Local Municipality is a category B municipality in KwaZulu-Natal, South Africa. According to statistics cited in the Mtubatuba 2018–2019 IDP report, 32% of households in the Mtubatuba Municipality are employed, compared to 10% of households without jobs. Over 51% of households are not economically active, which is alarming, whereas just 6% of households are discouraged job seekers. The study by Khumalo (2015) on the the role of informal trading in economic development at Mtubatuba found that Mtubatuba does not have many formally employed people.
Similarly, to other South African small rural municipalities, Mtubatuba Local Municipality is faced with development challenges that have a long-term influence on the municipality’s growth, stabilisation and development (Nyawo & Mubangizi 2015). These municipalities include those listed in Municipal Finance Management Act (MFMA) 2018–2019 General Report which contends that 58% of municipalities in the Free State and 75% of municipalities in the North West provinces also had regressing audit findings (AGSA 2019b).
Infrastructure and water availability continue to be major problems in the region (Khuzwayo 2020). Ngcoya and Kumarakulasingam (2017) state that considering that Mtubabtuba’s population density is (89%), only (65%) of its residents have access to electricity, 22% to piped water in the home, and only 17% have flush toilets. The 2022–2023 IDP report for Mtubatuba Local Municipality shows that the municipality has serious financial issues, making it more difficult for it to carry out its obligations and responsibilities successfully and promptly. For these reasons, conducting an investigation at Mtubatuba Local municipality is necessary to offer suggestions that help municipal authorities optimise revenue collection while enhancing the quality of services provided. These recommendations also motivate the modification of current revenue-collecting tactics as well as revenue management.
Research methodology
This article made use of qualitative research methods to obtain relevant information on the challenges faced by Mtubatuba Local Municipality regarding revenue management. The methodology for this article is qualitative research methodology which entailed in-depth interviews with municipal officials. It used in-depth interviews, also known as an unstructured interview which is a conversation used to collect data for analysis (Sharm 2017). Ten municipal officials from Mtubatuba Local Municipality were selected using purposive sampling aimed at soliciting relevant information on the challenges confronting the municipality in managing its revenues.
Ethical considerations
Ethical clearance to conduct this study was obtained from the University of KwaZulu-Natal Humanities and Social Sciences Research Ethics Committee (No. HSSREC/00006594/2024).
Findings and analysis
Biographical data of participants
This section provides the profile of the study participants, gender, age and level of education. Data were collected through in-depth interviews. The respondents were selected from Ward 4 and Ward 2 in the Mtubatuba Local Municipality. This section provides the reader with a clear picture of who the study participants are and their background. This information helps to contextualise the findings and understand how they might relate to broader populations.
Demographic information
Table 1 shows the profile of the respondents.
| TABLE 1: Profiles of the respondents who participated. |
Gender of respondents
Mchunu and Khuzwayo (2024) point out that Mtubatuba Municipality has been settled under administration many times owing to financial mismanagement, political instability and poor service delivery. This can be the outcome of conventional gender norms. Ciciolla and Luthar (2019) claim that there are societal standards that women should prioritise household chores and childcare in particular cultures or communities. Young (2015) further argues that women’s decisions to stay at home may be influenced by certain cultural standards. Hence, they were more likely to participate in this study. The gender of respondents is discussed in Table 2.
Age of the respondents
In Figure 1 it was observed that young people who participated in the study (10% of those) were between the ages of 26 and 35 making the least percentage, while 30% were between the ages of 36 and 45. The reason for this is that it provided them with a sense of responsibility and the conviction that their efforts could bring change. They understood that participating in municipal affairs enabled them to influence decision-making and contribute towards uplifting their community (Augsberger, Collins & Gecker 2017). The study’s 20% participants ranged in ages from 46 to 55. The highest parentage is 40% made up by participants ranging from age 55 upwards. Numerous municipalities are gradually implementing age-inclusive policies that recognise the worth of older workers, which is why the number of older individuals is growing.
Educational qualification of respondents
In Figure 2 of this study, it was crucial to determine the respondents’ educational background because it allowed the researcher to assess their level of familiarity with the topic at hand. The respondents knew a lot about the issue of the study, and 40% of them had a bachelor’s degree. Only 20% had diploma, while the other 20% had an honours degree. Only 20% of the study’s participants had a master’s degree. According to studies, people with higher education levels typically earn more money overall than people with lower education levels (Hillman & Robinson 2016). Inevitably, the study’s findings showed that most of the participants had tertiary education (degrees) but were unemployed. This affected how much money is paid for services. Participants viewed education as a safeguard in their financial security and future earning possibilities; however, in this instance, education is no guarantee of financial security.
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FIGURE 2: Educational qualification of respondents. |
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Income status of participants
In Figure 3 most participants (40%) made between R25 000 and R30 000 per month, which is appropriate cost of a bucket of food for a family. However, just 20% of participants received R15 000–R18 000, while 20% received income between R19 000–R21 000 and 40% received R22 000–R24 000. Research shows that increased salaries for municipal officials are often distributed unevenly, leading to perceptions of inequity and potential insufficient service quality, despite potential improvements in service delivery.
Analysis of findings from municipal officials
Table 3 reflects the challenges of public revenue management at Mtubatuba Local Municipality.
| TABLE 3: Challenges and effects of public revenue management on service delivery at Mtubatuba Local Municipality. |
Corruption and misappropriation
One of the revenue management problems affecting service delivery has been characterised as corruption. Thirty per cent of the participants indicated that misappropriation and corruption were the two biggest obstacles to effective revenue management. According to the participants, corruption led to the misallocation of public funds, as resources are directed towards projects or programmes that serve political interests rather than addressing the most pressing needs of the public. This results in inadequate funding for essential services such as healthcare, education, infrastructure and social welfare, harming the community’s general well-being.
Participant 4 mentioned that:
‘Corruption in revenue management impedes communication between municipal officials, councils and residents which undermines trust and confidence. Citizens feel abandoned and unsatisfied as a result of protests sparked over inadequate delivery of services.’ (P4, 36–45, Male)
The above indicates that participants were aware of the negative effects that revenue management corruption has on the provision of services as to the citizen’s lack of confidence in the municipality and its capacity to handle public resources. In addition, improper fund allocation was found to be a result of corruption in public income management. This is supported by Maseko, Robbetze and Masungini (2023) who argue that most municipalities have been devastated by issues such as fraud and mismanagement of public finances.
Participant 9 stated that:
‘Corruption raises the price of providing services because corrupt authorities ask suppliers and contractors for bribes as a result delivering services to the community becomes more challenging and expensive.’ (P9, 26–35, Male)
Another participant also noted that the quality of services offered by the municipality suffers when income intended for service delivery has been improperly used. It was found that funds intended to improve poorly served regions were instead given to the affluent leaving impoverished neighbourhoods amenities like Nordale and River View with insufficient access to basic.
Political interference
Brophy and Wandera (2019) point out that when political interference is present in revenue management, it creates opportunities for corruption and embezzlement of public funds. In this study, 20% of respondents believed that political interference was a challenge in public revenue management. The respondents revealed that politically connected individuals divert funds intended for service delivery into their own pockets, leading to a lack of resources for vital public services. This results in poor infrastructure, limited access to healthcare and education, and reduced overall service quality.
Participant 10 indicated that:
‘Political influence results in the improper allocation of resources as result crucial services go unnoticed and projects that are of poor quality and do not match community requirements may be built.’ (P10, 56–up, Male)
The participants indicated that it was challenging for the municipality to hire individuals with expertise in handling municipal finances because of the political structure of the municipality.
Participant 1 commented that:
‘Politicians convince authorities to utilize inadequate supplies or make compromises in order to save money, which also results in a decline in the quality of services.’ (P1, 36–45, Female)
It was evident that the participants had several opinions on this subject. As a result, participants were of the view that legislators must not obstruct tax collection and that the duty of the revenue officials should be clearly distinguished from that of the politicians. Participants maintained that they should be asked to act professionally and ethically for the proper management of the municipality’s operations. For instance, they should not serve as a sanctuary for revenue evaders. In conclusion, participants maintained that politicians must also refrain from intervening in collecting revenues and clearly distinguish between their duties and those of the Revenue Department.
Inefficient tax collection
Local governments’ main source of funding is tax collection. When tax collection is ineffective, the municipality may not be able to collect all of the taxes that people and businesses are required to pay. Twenty-five per cent of the participants indicated that effective revenue management relies on efficient tax collection systems hence inefficient tax collection was identified as one of the challenges.
Participant 8 pointed out that:
‘When taxes are not collected effectively, municipalities may be forced to make cuts to necessary services to compensate for the difference in revenue.’ (P8, 45–55, Male)
This means that the municipality might not make enough money to maintain its infrastructure which could cause these amenities to degrade. Cheruiyot (2015) argues that collecting using ineffective systems can lead to lower-than-expected tax revenues. Participants indicated that if tax collection mechanisms are weak, ineffective, or prone to evasion governments struggle to generate sufficient revenue to fund public services adequately. This can lead to a shortfall in funds available for service delivery.
Participant 3 commented that:
‘The municipalities are forced to utilize cheaper materials or make other savings due to ineffective tax collection which results in a decline in service quality.’ (P3, 56–up, Male)
As it has been stated by the participant this results in decreased service quality, postponed projects, and a general degradation in citizens’ quality of life. One of the participants indicated that a greater amount of land should be sold to citizens to create a larger tax base and create a pool of cash through land rates and property taxes.
Lack of qualification
A quarter of respondents (25%) indicated that inadequate qualification was a challenge in revenue management. A lack of knowledge and expertise in handling municipal finances is the primary cause of the municipality’s ineffective revenue management. The study found that municipalities are subject to inadequate skill of municipal officials.
Participant 8 commented that:
‘Lack of qualification results in lower tax collections in several ways, including ineffective management of revenue, insufficient tax law enforcement and failures to recognize and utilize new sources of income.’ (P8, 45–55, Male)
This implies that underfunding high-priority projects or the neglect of necessary services depletes financial sources for basic services. Kalonda and Govender (2021) also note that the municipality’s inadequate service delivery is further hampered by a shortage of trained and competent people. Participants reported that inexperienced employees find it difficult to develop and implement effective revenue-collecting procedures. Inadequate qualifications, in the participants’ opinion, lead to inaccurate planning of finances and budgeting.
Participant 9 said that:
‘The wrong use of resources can also result from officials’ lack of qualifications since they might not have the skills to make wise decisions about how to spend the municipality’s money.’ (P9, 26–35, Male)
The municipality will experience budgetary shortfalls if income estimates are inaccurate or financial funds are misused, which will make it more difficult to allocate funding for service delivery programmes. The participants maintained that the use of effective software and solutions for revenue management is hampered by a shortage of skilled employees. Participants suggested that the revenue officials should be made more aware of their responsibilities. It was also suggested that the Mtubatuba Local Municipality should provide scholarships for people to pursue higher education and develop their skills, for instance, through workshops. This will aid in preventing inefficiencies brought on by a lack of education and training.
Directions for future research
Future research could focus on the effect of community participation on payment compliance. This includes comprehending how communication strategies and public awareness campaigns influence people’s willingness to pay for services, which might aid in the development of more successful revenue collection techniques.
Conclusion and recommendations
This article deliberated on the challenges faced by the Mtubatuba Local Municipality’s capacity to manage its revenues. Providing critical services to the population is substantially hampered by issues in revenue management. To provide public services, a municipality must produce revenue. As a result, revenue management is critical and should be taken seriously, in conjunction with aggressive revenue collection tactics. In conclusion, the management of public funds is crucial to the provision of services in South African municipalities. The municipality has the financial capacity to deliver important services to its citizens if revenue management is done effectively. However, several challenges exist that can hinder effective revenue management in the municipality. These challenges include conflict of interest, non-payment, lack of qualification, political interference, ineffective leadership, corruption, and inadequate billing systems, high levels of outstanding debt, and insufficient community engagement. These have contributed to poor revenue management.
Several ideas were offered to address these challenges and improve public income management in the Mtubatuba Local Municipality. Among these recommendations include strengthening monitoring systems, developing and enforcing conflict of interest policies, improving communication with debtors, establishing clear job qualifications and improving leadership skills. The Mtubatuba Local Municipality can improve its income management by addressing difficulties and implementing the report’s recommendations, ensuring that it has enough finances to deliver basic services.
It was proposed that automated systems would considerably enhance revenue management, resulting in more revenue collections. The study suggests a decent tax system that can promote justice and encourage everyone to comply, including those who would have purposely avoided paying taxes. To incorporate a broader range of voices and examine all points of view, it was suggested that supervisory procedures be reinforced to prevent conflicts of interest from arising as a result of public engagement. The recommendations include building deeper ties with people through awareness programmes that emphasise the importance of paying for services. This might include public forums, workshops and feedback channels to help communities better understand their problems. The research recommends that supervision procedures be tightened to combat corruption. The research also advises that criminally negligent public officers be prosecuted to the fullest extent of the law. This entails holding corrupt public officials accountable to the rule of law, just like any other citizen.
Acknowledgements
This article is partially based on the author’s master’s dissertation entitled ‘Exploring the Role and Effects of Municipal Revenue Management on Service Delivery at Mtubatuba Local Municipality, Department of Community Development, School of Built Environment and Development Studies, University of KwaZulu-Natal, South Africa. Supervised by Dr N.S. Tshishonga.
Competing interests
The authors declare that they have no financial or personal relationships that may have inappropriately influenced them in writing this article.
Authors’ contributions
M.T.M. contributed towards the methodology used to obtain data for the article. M.T.M. also did the formal analysis and wrote the original draft. Additionally, M.T.M. was responsible for project administration and data curation. N.S.T. contributed towards the conceptualisation of the article, project administration, review and editing the article and supervising the whole project.
Funding information
This research received no specific grant from any funding agency in the public, commercial or not-for-profit sectors.
Data availability
Data sharing is not applicable to this article as no new data were created or analysed in this study.
Disclaimer
The views and opinions expressed in this article are those of the authors and are the product of professional research. It does not necessarily reflect the official policy or position of any affiliated institution, funder, agency or that of the publisher. The authors are responsible for this article’s results, findings and content.
References
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