EuroEconomica, Vol 38, No 1 (2019)

Abstract

South African rural municipalities continue to experience difficulties in executing their constitutional obligations, despite the increasing amount of resources that are being channelled to them through the intergovernmental transfer system. This study therefore examines the spending efficiency of these municipalities. The main objective of the study is to evaluate the efficiency of these municipalities in utilising their resources, particularly the intergovernmental transfers, as they account for more than half of their revenues. To empirical examine this, the Output Oriented Data Envelopment Analysis (DEA) method is applied on a panel data covering the period 2008/9 to 2012/13. The results from the Output Oriented (DEA) suggest that rural local municipalities are inefficient in their spending. Furthermore, the findings from the budget analysis show that these municipalities are not prioritising their spending, as they spent more of their resources on employee costs compared to vital expenditure needs such as repairs and maintenance of existing infrastructure.