mSCOA as the Foundation for Data-Driven Governance

Platinum sponsor:
Business Engineering

This webinar brought together economists, academics, municipal practitioners, systems specialists and statisticians to explore how mSCOA data, when properly understood and used, can move municipalities beyond compliance and become a powerful tool for evidence-informed decision making.

The core message

South African municipalities already hold rich financial data. The real opportunity now lies in how that data is used. mSCOA is not simply a finance reform - it is a business reform and a data architecture that, when used deliberately, can drive better governance, stronger oversight, and real public value.

Speaker contributions

Kgothatso Matlala - Economist: LG Data Management and mSCOA, National Treasury

Kgothatso set the foundation by explaining what mSCOA actually is: not just a chart of accounts, but a seven-dimensional data structure that creates a common financial language across all municipalities. She traced the journey from fragmented Excel-based reporting pre-2017 to a standardised, encrypted data submission environment today.

• mSCOA segments - project, function, item, fund, region, costing and standard classification - allow a single transaction to be analysed from multiple angles.
• The shift now underway is from compliance to insight: structured data must inform executive and council decisions, not remain confined to reporting processes.
• Poor data does not mean the underlying service delivery challenge does not exist - it means oversight institutions are less able to respond early and effectively.
• MFMA Circular 134 makes it explicit that municipal financial data is used to inform policy and budget decisions at national and provincial level.

"Compliance gave us consistency, and consistency gave us data. Now the opportunity is to extract value from that data through technology."

Prof. Nara Monkam - Associate Professor: Public Economics and Chair in Municipal Finance, University of Pretoria

Prof. Monkam outlined the collaboration between the University of Pretoria's Public Policy Hub and the National Treasury, which began in 2015 and has produced a harmonised 15-year municipal finance dataset spanning 257 municipalities.

• The 2017 mSCOA reform created a structural break between Version 1 data (2009 to 2019) and Version 2 data (2020 to present), limiting long-term trend analysis. The harmonisation work bridges this gap.
• The dataset integrates operating revenue and expenditure, grant data, capital expenditure, audit outcomes and municipal boundary changes into a single research-ready panel.
• When combined with spatial, demographic, labour market and governance data, this dataset can reveal infrastructure-employment links, intergovernmental transfer impacts, service delivery gaps and under-assessed property revenue potential.
• A technical note documenting the dataset construction has been submitted to National Treasury ahead of publication and wider academic release.

"This is not just a dataset. It is a platform for transformation - but only if we move from seeing data as a compliance tool to treating it as a strategic asset."

Dr. Tendai Zawaira - Development Economist and Postdoctoral Research Fellow, University of Pretoria

Dr. Zawaira presented practical insights drawn from working with the harmonised dataset, offering a preview of what mSCOA data can reveal when properly analysed.

• Operating margin analysis shows that a significant number of municipalities are operating with negative margins, signalling financial distress risk. Metros sit slightly above zero but remain constrained.
• Property rates revenue shows a downward growth trend across all municipal categories - a concern for fiscal autonomy.
• Employee costs as a share of total operating expenditure are rising in district municipalities, potentially crowding out infrastructure and maintenance spending.
• Irregular, unauthorised and fruitless expenditure have generally increased between 2014 and 2023, with persistent hotspots in the North West, Free State and parts of Mpumalanga and Limpopo.
• Data completeness is improving overall, but property rates data remains around 25% missing - a gap that limits analysis of own-source revenue potential.
• Negative capital expenditure values in the dataset require further investigation with National Treasury to determine whether they reflect recording errors or genuine trends.

"Already we can tell a story about where local government finances are going. Some of it is encouraging. Some of it is worrisome. But we can see it - and that is the point."

Zinzi Mphahlele - Manager: Budgeting and Reporting, City of Polokwane

Zinzi brought the practitioner perspective, focusing on how mSCOA segments enable real, enforceable oversight at ward level today.

• The region segment shows exactly where municipal resources are spent by ward or area, exposing spatial inequalities, revealing whether spending aligns with council-approved priorities and making it impossible to hide poor service delivery behind aggregated totals.
• The function segment identifies which department and senior manager is accountable for spending and service delivery outcomes - eliminating blame-shifting and making underperformance measurable and enforceable.
• Mandatory GPS coordinates on projects since 2022 mean funds must now be physically visible in the ward. Paper projects are exposed. Accountability has a physical address.
• As municipalities enter the public participation phase of the budget from 1 April, mSCOA data transforms participation from a symbolic exercise into an evidence-based conversation. Communities can see how national transfers translate into ward-level funding decisions.

"Oversight is no longer a matter of opinion. It is a matter of evidence. The challenge is simple and urgent: move from compliance to consequence, from reporting to oversight, and from spending to public value."

Philip de Bruin - Managing Director, Business Engineering

Philip examined the critical role of systems and technology in sustaining the mSCOA reform, and the progress made since its introduction.

• mSCOA forced the integration of previously siloed systems - billing, SCM, assets and payroll - into a single data model with one classification structure. This was transformative but demanding for systems vendors.
• Financial ERP systems in local government are largely compliant with mSCOA requirements. The challenge is not non-compliance but familiarity and consistent use.
• Loose-standing systems for asset management and payroll are increasingly unviable. The integration demands of mSCOA make standalone spreadsheet-based approaches unsustainable.
• Proper mSCOA-compliant systems provide validation at source - a wrong transaction cannot be entered without being flagged across all segments. This fundamentally reduces miscalculation, duplication and incomplete records.
• When strings are green and submissions are correct, data is available to National Treasury in near real time - a vast improvement on the fax-based reporting of the past.

"When we do this mSCOA thing properly, we will be able to report in a near real-time environment. That, in itself, is a huge improvement."

Malibongwe Mhemhe - Director: Local Government Institutions, Statistics South Africa

Malibongwe shared how Stats SA is responding to municipal calls to reduce reporting burden by drawing directly from the National Treasury mSCOA database rather than sending separate questionnaires.

• Stats SA publishes four quarterly and three annual publications based on municipal financial and non-financial data. The quarterly income and expenditure data from the mSCOA database has been tested and validated to a level of satisfaction.
• From the next municipal financial year, Stats SA intends to stop sending quarterly financial questionnaires to municipalities and extract data directly from National Treasury's local government database.
• Balance sheet data is still being tested. A feasibility study on metros and secondary cities has been extended to all 257 municipalities, with findings expected before April 2027.
• Non-financial data - covering water, electricity, sanitation, waste, workforce and indigent households - remains a challenge. Inconsistent submissions from municipalities mean the same question directed to different officials can produce different answers.
• Collaboration with National Treasury, COGTA and sector departments is needed to create a single, credible non-financial data standard.

Key takeaways for practitioners

1. mSCOA is a business reform, not a finance reform. Every department, not only finance, has a role in its implementation and data quality.
2. Governance structures established to oversee mSCOA implementation must be maintained and kept active. Where they have collapsed, slow adoption and poor data quality follow.
3. Municipalities must prioritise data accuracy at the point of capture, not at year end. Credible data is built transaction by transaction.
4. The region and function segments are powerful oversight tools available right now. Councils and communities should be using them to ask where money was spent and who is accountable.
5. Property rates data submission gaps must be addressed. This is one of the most underutilised sources of own revenue in local government.
6. Standalone systems for assets, payroll and SCM are increasingly incompatible with mSCOA requirements. Integrated ERP environments are essential.
7. Public platforms including Municipal Money and the GO Portal give communities direct access to budget, spending and service delivery data. Use them.

Moderated by Mr. Zolani Zonyane, The Municipal Edge
Hosted by: Dan Claassen, Future Cities Africa.

CPD points available - contact cpd@cigfaro.co.za