Revenue & Debt
Tariff Cost-Reflectivity Analysis
Whether approved service tariffs recover the full cost of providing each trading service.
Why cost-reflective tariffs matter
A tariff that does not recover the full cost of providing a trading service guarantees that the service runs at a loss, draining funds that should sustain other functions. The MFMA budget process requires tariffs to be set on a sound, cost-reflective basis, and chronic under-tariffing is a structural driver of municipal financial distress. AuditPro Core analyses whether approved tariffs recover the full cost of each trading service so council and oversight can see where services are being subsidised.
The Numbers
AuditPro Core renders this view from your tenant's live, tamper-evident records. The figures below are illustrative sample data.
Services Below Cost
2 of 4
water, refuse
Largest Gap
Refuse −22%
below cost
Electricity Margin
+8%
cost-reflective
Annual Deficit
R 68 m
trading services
Tariff vs cost of supply index (cost = 100)
Cost-reflectivity by service
| Service | Cost Recovery % | Deficit (R m) | Status |
|---|---|---|---|
| Water | 91 | 24 | Below cost |
| Refuse | 78 | 44 | Below cost |
| Electricity | 108 | 0 | Cost-reflective |
Figures shown are illustrative sample data for demonstration. AuditPro Core renders these views from your own tenant's live, tamper-evident records.
Full cost of service
Cost-reflectivity means the tariff covers bulk inputs, distribution, maintenance, overheads and a contribution to asset renewal. Recovering only direct costs still leaves the asset base to decay.
Under-tariffing is a hidden subsidy
Setting a tariff below full cost subsidises the service from general revenue or reserves. This is sometimes a deliberate social choice, but it must be quantified and consciously funded.
Tariffs and asset sustainability
If tariffs do not fund depreciation and renewal, infrastructure cannot be replaced as it wears out. Persistent under-recovery is a slow path to service collapse.
How AuditPro Core Bridges the Gap
- Cost-reflectivity analysis: approved tariffs are tested against the full cost of each trading service.
- Subsidy quantification: the shortfall on under-priced services is measured and surfaced.
- Renewal-funding check: tariffs are assessed for whether they fund depreciation and asset renewal.
- Decision support: results export to inform the MFMA tariff-setting process.
Key Takeaways
- Cost-reflective tariffs must cover bulk, distribution, overheads and renewal.
- Under-tariffing is a hidden subsidy that must be quantified and funded.
- Tariffs that ignore renewal lead to long-term asset collapse.
- Sound tariff-setting is an MFMA budget requirement, not optional.
See This on Your Own Data
AuditPro Core renders this dashboard from your tenant's live, tamper-evident records — every figure traceable to source.