MUNICIPAL AUDIT
Local government failures: Another year, another inspection, another bad outcome — with a few exceptions
Just 27 of South Africa’s 257 municipalities have a clean bill of financial health, according to the local government 2019/20 audit. That’s 10 less than in 2017 when the present crop of municipal politicians came into office. Some R5.5bn was spent — without anyone able to say what for.
Four months before the 2021 local government elections scheduled for 27 October, the state of municipalities is dire. According to Tuesday’s local government audit outcomes briefing to MPs, just more than a quarter of South Africa’s municipalities, or 27%, themselves say they don’t know if they can continue — and almost one in four councils, or 57, failed to deliver any kind of financial statement by the statutory audit deadline.
The good news is that there are 27 municipalities with clean audits, including one of the eight metros, Ekurhuleni.
Whether it’s Okhahlamba in KwaZulu-Natal, Nkangala in Mpumalanga, Witzenberg in the Western Cape or Senqu in the Eastern Cape, these municipalities’ clean audit — unqualified with no findings in auditor-speak — have the administrative and political leadership that is interested in ensuring financial controls are in place, procurement regulations are followed and consequences for contraventions are imposed.
At Witzenberg, “it’s about the leadership tone set” from the municipal manager, responsiveness to audits and how the council does its oversight, Auditor-General Tsakani Maluleke told the Standing Committee on the Auditor-General and Standing Committee on Public Accounts (Scopa).
At Okhahlamba in the Drakensberg, the municipal leadership invested in systems for credible financial statements and compliance. “The leadership there has embraced the notion that a clean audit will help them attract investment… (for tourism).”
The ugly news is the 22 councils countrywide with disclaimed audit outcomes — the worst possible — that went through almost R5.5-billion without being able to say where the money went.
Put differently: of the R6.45-billion taxpayers contributed via the national purse to those municipalities through equitable share and conditional grant allocations, only R980-million remained by municipal financial year-end.
Or as Maluleke put it, “Nobody is reporting. Nobody is accounting. Nobody is sure where the money went.”
For example, the Chris Hani District Municipality in the Eastern Cape could not account for how it had spent R1-billion of the R1.043-billion it had received in equitable share and grant allocations.
Similarly, the Dr Ruth Segomotsi Mompati District Municipality in North West, which received a disclaimer, was unable to account for how it spent R582-million of the R697-million in its bank accounts. MPs were told bank accounts were not reconciled, but double payments were made to suppliers.
This district council is one of three in North West that were disclaimed. No municipalities in North West received a clean audit for the 2019/20 financial year, according to the Auditor-General’s briefing presentation to MPs. Of the province’s 22 councils, aside from the three disclaimers, six received qualified audit reports with findings and 12 failed to submit any financial statements whatsoever.
“Local government in the North West has collapsed,” acknowledged President Cyril Ramaphosa in Monday’s virtual address to the ANC Norman Mashabane regional conference in Limpopo, where he called on party members to nominate “capable” councillor candidates for the upcoming 27 October local government elections.
The president talked up municipalities, saying they needed credible leaders, and investment was crucial, according to TimesLive. “We must market our towns and local government areas to would-be investors with a view to create employment. We must become advocates of investment.”
Not so at Lichtenburg in North West which is losing its biggest employer, Clover, over council failures to keep water and electricity going and ensuring proper road maintenance. In early June 2021, the dairy product manufacturer announced it was moving its cheese factory from Lichtenburg to eThekwini, KwaZulu-Natal.
Nor at any of the municipalities where protests over service delivery failures erupt regularly, most recently at Harrismith, part of the troubled Maluti-a-Phofung municipality in the Free State.
Coincidentally, as in the North West, no Free State municipality had a clean audit. Eight of the province’s 23 councils did not submit any financial statements. Its metro, Mangaung, wracked by protests over service delivery failures, also failed to submit financial statements.
The bad news is somewhere in between.
It ranges from contravening procurement rules such as competitive bids, keeping financial controls or the spending of R1-billion on consultants, often for the most basic financial statements and often without impact, given 10 of the 22 disclaimed councils had spent R105-million on consultants.
“In 68% of cases, the problem is not that there are vacancies in the finance department, but rather that the people employed in those finance departments did not have the skills required,” said Maluleke.
It is indeed lamentable that the trajectory of municipal performance is rather unimpressive. Much of the progress made has unfortunately been eclipsed by the widespread ‘failure’ of many municipalities. Rather than moving communities forward, many municipalities have themselves regressed.
Municipal audit outcomes have worsened. The recorded R26-billion irregular expenditure — this includes the overpayment for goods and not adhering to procurement rules — is probably not the final tally because of inadequate municipal statements.
But municipalities also fail to recover all of what’s owed to them from rates, electricity tariffs and other levies; on average 63% is recovered. This means councils owe suppliers such as Eskom and water boards more money than is in the kitty, and helps explain the 209-day payment delays.
The bottom line? Revenue not collected, creditors not paid, councils in deficit.
This means 46% of equitable shares, grants and other monies meant for maintenance and service delivery are instead diverted to pay the salaries of admin staff and councillors. Maintenance and service delivery does not happen.
All this is known. Finance Minister Tito Mboweni said as recently as May 2021 in his Budget Vote debate that 163 municipalities were in financial distress and 40 in financial and service delivery crises — and 102 municipalities adopted budgets they could not fund.
“It is indeed lamentable that the trajectory of municipal performance is rather unimpressive. Much of the progress made has unfortunately been eclipsed by the widespread ‘failure’ of many municipalities. Rather than moving communities forward, many municipalities have themselves regressed,” said Mboweni, adding later, “Poor political leadership demonstrated by political infighting in councils and political interference in administrative matters have served as a stumbling block to a viable municipal sector.”
Tuesday’s Auditor-General briefing to MPs was a heads-up, if you will, before the official release of the local government 2019/20 audit. Similar briefings have been given to the ministers of finance and cooperative governance, and others.
Maluleke spoke frankly, telling lawmakers it was all about stability and leadership.
“It is the type of leadership we deploy and appoint to specific roles that defines how an institution runs… Without dealing with the quality of leadership that’s in charge of institutions, we are not going to get this right.”
What needs to happen is clear. Whether politicians in the middle of councillor candidate selection and the municipal campaign trail will pay any heed, remains to be seen. DM
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I do think it worth mentioning that by far the majority of problem municipalities are in ANC hands. The vast majority of well run municipalities are DA led.
You would think the DA would do this themselves. Unfortunately, where they may have a great results in well run municipalities, they fail dismally to leverage these accomplishments to new voters. Maybe they need some irregular expenditure on a decent advertising agency.
We all can have our opinions about the DA, but when it comes to corruption and efficiency with tax payers money, there simply is no comparison to any other party. Yes one would think that would translate to more votes, but that is an entirely different problem, partially created by the DAs own goals, but also artificially created by some commentators. Just look at this authors article a while ago named:
“False Construct? DA’s Trumpian turn on race issues” which was completely misguided and purposefully tries to paint the DA into a right wing corner while simply ignoring ant and all policies that the DA have.
Maybe better to spend advertising budget on T shirts and KFC. Double portions to be washed down with promises of double welfare grants.
And CR sees nothing wrong with continuing to deploy cadres. Who is causing the most damage? Jacob or Cyril?
What is the root cause of the failure of our Municipalities? Elected political leadership becomes the executive of organisations that they are ill equipped to run. Fix the corruption, absolutely, but and we’ll still have a compromised Municipal delivery structure. Municipalities exist to deliver services within three broad areas – in business speak, 3 different businesses:
1. Utilities/basic services; local roads, water, sanitation, electricity (in some), refuse etc
2. Welfare/charity; allocating services to the poor and those that need help with access to basic services/utilities
3. Public amenities – swimming pools, parks etc
Municipalities do not organise around these different organisations that have different management needs, they operate in a single structure. The outcome is no/little focus in direction, staffing, systems, operational management ( the guys actually doing the delivery). Importantly the decision making executive are politicians, not mangers with skills at running each of these 3 different organisations, each of which requires unique skill sets and experience. In a major metro the “CEO” of what should be primarily a utilities business is a politician. How can this be appropriate? Need to do away with Executive Mayors. We need to separate the running/managing of our Municipalities from the decisions on political direction. Overlay this with a civil service (Gov Departments) – similarly resourced that align on delivery and we’ll be on the right track.
You are premised on the fact that the people in these failed municipalities actually do their jobs, or even know what their jobs are. We should realise the politicians are not in the least interested in the municipality other than the fact that it provides them with money and status. As they remain in power they appoint staff whose sole qualifications are family & clan. The state subsidies are seen as theirs, as are the bank accounts. Everything is geared towards themselves, and zero to the poor fools who keep on voting for them. The tragedy is that the power to get rid if them is there, but not utilised. Both parties are to blame – how is it possible, under such dire circumstances, that the Opposition cannot convince voters to change their votes?
Well put!!
Would be interesting if we would hold both parties to the same standards. Right now this is simply not the case…How can one compare a party that is responsible for over a trillion rand wasted and stolen money to a party that overwhelmingly actually does what it’s paid for? Of course you will find the one or other example of corruption in the DA, but comparing it to the ANC is like comparing the size of a fly to an elephant. I really am missing people giving credit where it is due. And you have to admit that some of the accusations against the DA are simply not reality.
I wasn’t accusing the DA of corruption. They are ‘guilty’ of not reading the room; of being stuck in a groove; of bias; of no vision… not crimes of course, but it doesn’t help us get out of the hole either.
While I agree with the “reading the room” part, the policies actually do have vision and their governance record shows that it actually works. Does one have to have obviously wrong policies like cadre deployment and iron fist untransparent full control of all state owned enterprises and service delivery to be accepted by voters? Nobody seems to explain exactly why the DAs policies would be a problem, just accusations that they are wrong often laced with unsubstantiated claims of racism.
I feel it would be ok to have a fair and unbiased debate about these policies, maybe without the unfounded knee-jerk accusations of racism or the DA being right-wing? So when you say both parties are at fault, I do think it necessary to qualify who is actually destroying the country instead of accusations of what the opposition is missing or not doing, especially considering the ANCs stance to absolutely anything the DA says, right or wrong…its almost as if the ANC would vote against anything the DA says, even if it would help the country, just because it’s the DA. This is supported by an implied narrative that voting for the DA is basically the first step to reintroducing apartheid, which of course is complete nonsense, almost on the level of the NPs panic creating “Swart gevaar” propaganda.
This is not a question of “reading the room”. The issue is simple: The DA is overarchingly viewed as “white”, overshadowing the tremendous amount of good it does. And both the ANC and the EFF do absolutely everything in their power to perpetuate this view. Until this perception is changed somehow the DA will have its hands tied, regardless of its intrinsic value to South Africa.
Please can we see a schedule comparing DA run municipalities and ANC run municipalities …….most of these names mean nothing to the average reader.
Yes, I’d like to see some figures too.
If I were the DA, I would have put most of my eggs in the Local Elections, and win a majority by hook or crook, or with the help of the ancestors if necessary. Forget about the white voters. Even if they leave you, you can still make an alliance with the FF. Convince the black voters. This is where you can put your money where the mouths are. It seems smallanyana, but its the only way to the Big Ticket.
I agree completely. Local government is where the DA can make the most impact and from there they can build some strength in the provinces. As far as national politics is concerned, the DA should just concentrate on maintaining a core of competent MPs in parliament to keep the rest on their toes. It’s a pipedream to think of having power nationally.
That is exactly what happens when the anc deploys its cadres instead of appointing skilled citizens. And cr was the chief of cardre deployment and is now the chief of the whole organisation – scary indeed.
“Poor political leadership demonstrated by political infighting in councils and political interference in administrative matters have served as a stumbling block to a viable municipal sector.” Tito is so wrong. It should read “Poor political anc leadership by cr and the 5 other dwarfs serve as a stumbling block to a viable country.”
I do think the author’s omission of the relative success of the DA at municipal level is somewhat unfair.Having said that , the DA must accept some of the blame for its bad publicity- for example the sad saga of the ‘self resignation ‘- of Madikizela , really poorly handled.And look at the exodus of black MPs and municipal leaders-why?The DA should make more of an effort to beat the ANC at its own game- much more grass roots engagement, infrastructure development, and most important, promise a socialgrants system!With all the monies currently lost to thieving by the cadres that should be achievable!
Another R5.5 billion stolen that compromises service delivery to the poor. This is destabilizing the country and in my eyes could be construed as treason.
If the job of a municipality is to deliver services, meaning as a municipal employee ones justification for their salary is making sure the municipality achieves this basic function, and most of the municipalities fail at this, how do the people who work in this institutions justify their salaries?
The money these municipalities can’t account for only tells a fraction of the extent of the losses, there’s also the salaries which translate to wasted expenditure if the whole entity fails to deliver on its basic mandate. I could never associate myself with an entity that fails more than it succeeds, ultimately that’s a reflection on me essentially implying I’m comfortable with getting a benefit that I haven’t worked for!
This is such a convoluted topic. Where I want to agree with so much being said, there is another side to this story which no one ever raises or knows about.
Yes, there is enormous corruption. Yes, there is enormous incompetence. Mostly politically driven. The reality is that most South Africans think that all politicians and officials are both corrupt and useless. But there is an unwritten story.
Municipalities are supposed to be about service delivery. One of the unintended outcomes of the prevalent corruption is that the response is to over-regulate to the point where service delivery becomes impossible. It is a silent truth amongst many working officials that the safest way to survive is to do nothing. Obtaining approval to work is almost impossible. Ask any of those “well-run” municipalities how long it takes to approve a tender for construction. More than a year in may cases. The reality is that where service delivery takes place at all, it happens not “because of” political leadership, it happens “in spite of”. Where officials decide to work “in spite of”, they fear the latest trend – “consequence management”. Ask a good city manager to use discretion to allow service delivery, and they don’t have the appetite – citing the feared auditor. Who checks the auditors? Why do they charge bankrupt municipalities to do audits, where there is nothing to audit?
Space for comment is limited – I wish I could write a book. Local government is systemically doomed for failure.
It’s usual in many high profile jobs that the people employed seem to forget that they vowed to work for the poorer or societies in needs because of their greed towards the company’s finance,instead of changing their bad habits and work accordingly and professionally they keep damaging and draining the municipalities down
I don’t why Unisa is using these publications as case study to push the Neoliberal agenda