Perceived Effectiveness of Municipal Financial Management on the Performance of Inventory Stock Management in Local Government of South Africa

Abstract

This paper reports on the perceived effectiveness of municipal financial management (MFM), on the performance of inventory stock management, by South African local government. The study aimed to evaluate and discuss various factors affecting the effectiveness of MFM on the performance of inventory stock management, in a local municipal government of South Africa, with specific reference to the Kwa-Zulu Natal (KZN) Province. The MFM Act was used as a theoretical framework for the study, and a quantitative research method was applied. The questionnaire was formulated based on information obtained from the literature, and was distributed to only one KZN local government department. The sample consisted of 57 respondents, selected using a census sampling method. The results indicate that there is significant relationships between experience and performance of inventory stock management (p=.003a,b*), experience and effectiveness/efficiency of MFM (p=.000a,b*),as well as experience and the economic viability of MFM (p=.000b,c*).Interestingly, the respondents also indicated that, although there is good inventory stock management, there is a weak relationship between the effectiveness/efficiency, economic viability, and transparency of MFM. This study recommends that further research should aim to advance financial management skills in South African local government, in order to build financial management capacity to deal with inventory stock management issues. This should enable communication with other related structures and improve the understanding of each other’s efforts in the organization.