A Financial Health Measurement Framework for South African Municipal Governments

Abstract

Purpose: This study aims to create a conceptual framework for a methodical assessment of the financial health of South African municipal governments. 

Methodology: Conceptualization and literature study research methods are employed to explore the meaning and measurement of local fiscal health in South Africa. 

Findings: In order to thoroughly evaluate the financial health of South African local governments, the study created a four-dimensional framework consisting of cash solvency, budget solvency, long-run solvency, and service-level solvency. This framework was supported by 14 financial indicators.

Conclusions: The fiscal health measurement framework developed in this paper with its attendant dimensions and indicators, can potentially provide a fairly comprehensive indication of the prudence with which municipalities manage their short-term liquidity, budgets, long-term debt, own revenue sources and expenditure commitments to essentially support their critical developmental role in the country..

Keywords: Municipal government, Public Financial Management, Financial health