The rural nature of Ingquza Hill results in it having a low income base from assessment rates. This is aggravated by the high unemployment rate and associated high poverty levels and low affordability rates. The Municipality is also not static and population growth and town developments will further weaken this income base if not managed correctly.
Assessment rates constitute 1.91% of the municipalities operating income and services only 4.87%. The remainder is primarily government and grant funding. Grants account for 195.46% of the municipal revenue, which means that without these grants the municipality will not be able to function. It is therefore essential for the municipality to consider ways and means to enhance their own revenue base.
The ability to generate income from services is compromised by a number of factors including the infrastructure backlog which limits the municipality’s ability to render essential services to its households and recoup revenue. The fact that the municipality is not a Water Services Authority also limits its potential income. The majority of people in Ingquza Hill also qualify as indigents, which means that they do not make a meaningful contribution to the fiscus of the municipality.
According to IMFO guidelines, municipalities must not spend more than 35% of their operating budget on staff costs. The table below demonstrates that for 2006/06, only 39.11% of the operating budget went to salaries. In 2006/7, staff costs account for 75% of the operating budget. It is important that the municipality keep a balance between the personnel needs and the funds available.On the positive side, net debtors have decreased, meaning that revenue streams are growing at a faster rate. A credit control and debt collection policy has been implemented and continued efforts to manage outstanding debtors will enhance operating income and improve financial gearing levels. Revenue is growing at a pleasing rate as compared to expenditure growth even though these sources of income are attributable to Grants and Subsidies. The net surplus for 2006 also showed an increase over previous years.