< Go Back

It’s about time we rethink how municipalities generate revenue

September 17, 2024

For any council or municipality to function optimally, it needs residents and businesses to consistently pay for services, writes Miyelani Holeni, Group Chief Advisor at Ntiyiso Consulting Group, whose mission is to empower institutions that enable Africa’s development.

If residents do not pay for services, municipalities will definitely not be able to provide the services that their residents require.

Those of us who survived the deadly COVID-19 pandemic that stole two years of our existence, livelihoods, savings and loved ones are still trying to regain our bearings and the respective trajectories we were on before the onslaught.

And while the world is gradually opening up, loadshedding and watershedding have entered the fray in South Africa, causing untold damage to all businesses and households, while municipalities have not been spared.

As it stands, infrastructure disrepair, backlogs and under-investment have prevented optimal revenue generation. Daily, we are witnessing how ever-rising interest rates, inflation, and job losses severely batter the economy.

All these elements have led to the rising cost of living, which has resulted in many citizens finding themselves in a position where they cannot afford basic expenses, including paying municipal service bills.

For local government stakeholders, the time is ripe to relook at how income is generated from the communities that are under severe financial strain and how this revenue is appropriated wisely to provide all involved with the greatest cushion against these challenges.

Municipalities have to rethink how they price their services, how they measure residents’ usage, how they bill and collect against those services, and lastly, how to exercise effective credit control and debt recovery methods.

Municipalities need to go back to the principles of revenue management and the value chain thereof with an understanding that a revenue division represents the business side of local government.

The revenue value chain is about achieving four goals that include predictability through management, completeness of revenue (through billing and collecting every rand), protection of revenue following defined processes and growth.

Perhaps the time to start thinking about how to integrate this value chain – not just as a concept but in reality – has arrived. Planning and designing a dwelling is the first step in defining a revenue generation plan. Municipalities have to master each one of the revenue value chain components in order to achieve the set targets or thresholds.

For any municipality to function optimally, its residents must pay consistently for the services they receive.

On revenue collection, the municipalities must consider several factors, including an assessment of the Customer Relationship Management Policy.

This policy is the municipality’s strategic position on how it intends to develop better customer relations and automate customer interaction to achieve better turnaround times.

Municipalities must realise cash flows from billing customers accurately by implementing billing integrity and quality assurance processes.

This is evaluated by, among others, ensuring that all revenue line items and all customers are billed every rand of consumption every month without fail.

Furthermore, municipalities should also be able to efficiently generate income from a diverse pool of available and innovative revenue sources to improve the revenue base.

The process has to use revenue data science techniques to analyse complex volumes of municipal data to identify revenue leakages and discover opportunities to increase revenue from existing and, importantly, new sources.

In the context of revenue, data science is about utilising data analytics across all the revenue collection and management phases to create dashboards that will indicate how and when revenue is generated.

Revenue management and increase require a scientific, entrepreneurial discipline to design, test and grow new revenue lines. In addition, municipalities have to employ more skilled revenue professionals who are innovative and can apply a systems-thinking approach to revenue generation, conversion and sustaining revenue.

Likewise, municipalities should have automation of systems to drive efficiency and have an end in mind. They have to set targets and adhere to those established targets so that money constantly flows into the municipal coffers.

Lastly, officials within the municipalities are required to practice the highest levels of discipline when it comes to governance to safeguard the expenditure of revenue, including the grants under their care to meet the service delivery mandates and to develop infrastructure that will support the growth of the local economy.

In addition, municipalities must implement the “science” of revenue management to achieve completeness of revenue and eliminate revenue leakages in the value chain. Using these strategies is how they will become sustainable. ESI

About the author

ESI Africa
Content Team
ESI Africa is the global leader in disseminating African utility, energy, power, mobility and water market news and insights. We provide over 50,000 professionals with renowned high quality and insightful editorial, equipping them with essential information to drive their own businesses.
Contact Us

Want to Generate Opportunities?

VUKA is the trusted media partner to key professionals, policy makers, suppliers and
manufacturers. We provide unparalleled opportunities for industry-wide connection.