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eThekwini municipality severely censured in latest Auditor-General report

eThekwini municipality severely censured in latest Auditor-General report
Mayor of eThekwini Mxolisi Kaunda. (Photo by Gallo Images/Darren Stewart)

An Auditor-General’s report on eThekwini was filled with disquiet about the city’s future and its prospects as a going concern, given its growing infrastructure inadequacies and whether it would be able to finance desperately needed repairs.

The eThekwini municipality is not addressing irregular expenditure, no significant targets have been set for managers, and there is scant, if any, consequence management for underperforming employees. 

These were some of the findings included in an audit outcome report for the 2021-2022 financial year, presented at a virtual full council meeting on Tuesday by Auditor-General representative Vanuja Maharaj.  

Councillors heard that the city had incurred irregular expenditure of R1.5-billion for the period in question, and only achieved 46% of its planned performance targets for the year. 

While the municipality received an unqualified audit with findings, Maharaj’s report was filled with concern about the city’s future and its prospects as a going concern, given its growing infrastructure inadequacies and whether it would be able to finance desperately needed repairs.  

She said the city’s water losses for the period in question had amounted to 57% of the total bulk water purchased.  

“The unfavourable expenditure on repairs and maintenance and capital expenditure has negatively impacted infrastructure as indicated by the increased water losses. The continuation of the current trend could be dire for the consumer and municipality with a likely increased tariff and consequently lower debtor recoverability rates.  

“The possible effect on water-intensive commercial clients and consequential impact on the economy could be devastating,” said Maharaj, who called for “urgent intervention to address the ageing infrastructure and illegal connections”. 

Maharaj painted a bleak picture of a municipality that is regressing in almost every measurable metric, and where patronage and cronyism are instrumental in ongoing service delivery failures. 

‘Absolutely shocking’

Opposition councillors called the findings a “disgrace”, “embarrassing” and “absolutely shocking”, while ANC Mayor Mxolisi Kaunda said he welcomed and accepted the report. “We accept there are still weaknesses in the system that need to be filled,” he said during the meeting.  

In recent weeks, Kaunda’s position has become increasingly vulnerable. Leading a precarious coalition government, he is the face of the city’s poor response to its sewage crisis, which resulted in many of eThekwini’s beaches closing over the festive season due to high E. coli levels flowing into the ocean.   

Last week, Active Citizens Coalition (ACC) president Imtiaz Syed wrote to Speaker Thabani Nyawose asking that a vote of no confidence in Kaunda be heard at the full council meeting. But opposition councillors on Tuesday expressed concern that because the meeting was being held virtually, the number of ANC councillors, in particular, could not be verified. A date for the vote would be announced in due course, Nyawose told the meeting.

The council is expected to sit on Friday to vote for a new deputy mayor after the ANC collapsed the vote last week.

Read more in Daily Maverick: “Cries of ‘insult’ and ‘sabotage’ as eThekwini council meeting collapses due to ANC councillors’ no-show

The AG report also found that when it came to expenditure management, reasonable steps had not been taken to ensure that the municipality implemented and maintained an effective system of expenditure control. 

This included procedures for the approval and/or authorisation and payment of funds for expenditure related to the Expanded Public Works Programme (EPWP) and Presidential Employment Programme (PEP). This is a new finding.  

Material irregularities notices were issued for both programmes. For the EPWP, this was because payments had been made to ghost employees, beneficiaries who were deceased and beneficiaries who were employed in other government departments.

For the PEP, a material irregularity notification was issued because payments went to individuals employed in other government departments. The AG is expecting a response to the notifications, with the deadline being Friday.

In the new focus area of environmental management, another new finding was that the Kingsburgh, Isipingo and Mpumalanga wastewater treatment works “did not have valid operating licences”.  

Another new finding in the environmental management focus area was that eThekwini’s northern wastewater treatment works was “not maintained to prevent malfunctioning infrastructure that could not operate as intended”.  

Consequence management failures

As for consequence management, in a repeat finding, it was noted that disciplinary proceedings were not instituted by the council when an independent investigation confirmed financial misconduct by a senior manager.

In another repeat finding: “Appropriate action was not taken against officials of the municipality where investigations proved financial misconduct…”

The report found there had been a regression in procurement and contract management. In a repeat finding, it was stated: “Some goods and services with a transaction value above R200,000 were procured without inviting competitive bids, as required by SCM regulation 19(a). Similar non-compliance was also reported in the prior year.”

New findings in the compliance section of the report included that some municipal employees “whose close family members had a private or business interest in contracts awarded by the municipality failed to disclose such interest”.

Another new finding was that those in the employ of the municipality who had private or business interests in contracts had failed to disclose their own interests.

Irregular expenditure incurred for 2021-2022 was R1.5-billion, according to the report. The “root cause” for the figure (the highest since the R2.34-billion incurred by the municipality in 2018-2019) was the non-implementation of controls and monitoring to ensure adherence to procurement processes. There were also ineffective consequence management processes and “a lack of understanding of [supply chain management] processes.

“Management did not implement preventative controls in the environment to ensure a reduction in the incurrence of irregular expenditure,” according to the report. “A lack of effective consequence management resulted in a lack of accountability.”

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Maharaj told the meeting that because the municipality was “at the forefront of service delivery”, it was “critical for them to have sound systems of internal controls and effective governance structures in order to achieve their goals”.

Management should improve controls over demand management and planning to ensure that a competitive bidding process was followed, she said. The accounting officer should also implement and monitor effective consequence management structures within the municipality to ensure disciplinary proceedings were instituted timeously and officials were held accountable for their actions.

“The understanding and application of preventative controls need to be entrenched in day-to-day activities by management through appropriate reviews, monitoring, corrective action and credible reporting by officials. Proper record-keeping measures should be implemented to ensure that complete, relevant and accurate information is accessible and available to support performance reporting as well as compliance, with applicable legislation,” said Maharaj in her recommendations. 

In a statement shortly after the council meeting, City Manager Musa Mbhele said: “Appropriate plans are being implemented to address consequence management, contract management and performance information. 

“The municipality will continue to work towards the internal control framework to ensure that there is continued trust and confidence in the way the city is run.”   

He said the city would initiate processes for the recovery of any confirmed financial losses as well as strengthen controls to prevent a recurrence of financial loss.

“The municipality is committed to ensuring effective consequence management, without fear or favour, to build the right culture in the municipality. We are committed to moving towards performance, integrity, transparency, and accountability through more courageous, ethical, accountable, capable and citizen-centric leadership,” Mbhele said.

‘Credible and balanced’ budget — mayor

Kaunda said in the same statement that the municipality had achieved a “credible and balanced” budget and an AA+ investment grade credit rating with a stable outlook despite the current economic climate. He did, however, raise concern over the rising amount owed to the municipality, and rising water and electricity distribution losses. 

The African National Congress eThekwini Region said shortly after the conclusion of the meeting that they, “[paid] tribute to all categories of staff in the municipality and its entities for their efforts aimed at ensuring prudent financial management. 

“As we collectively strive to ensure sound financial management, we must ensure that in our municipality, we save every cent and use our budget to improve the lives of residents.”

The eThekwini region also said the impending motion of no confidence against Kaunda was “nothing but a public relations exercise aimed at pitting the mayor against the people of eThekwini.

“It won’t succeed,” the region pronounced.

The DA, the official opposition in the city council, said that eThekwini’s poor record in meeting performance targets “indicates a collapse in service delivery and proves that the municipality is regressing under the leadership of the ANC and, in particular, Mayor Mxolisi Kaunda”.

It said it was exploring the possibility of “pursuing criminal charges against those implicated in the report”. DM


Comments - Please in order to comment.

  • Jacques Wessels says:

    Just reviewed the Annual Report for the George Municipality & found it to be comprehensive with key performance indicators vs performance etc. I fail to understand how civil society allow local authorities to mismanage their communities. Stand up & engage via the media, rates payers associations etc or directly via ward committees which give input directly to council & hugely underutilized!

  • Fanie Rajesh Ngabiso says:

    While I believe firmly in the rule of law it is a 2 way street.

    This is not a regional issue, it is a national one.

    The South African people are being stolen from – every day – by our government – in every way possible.

    The government steals actively through false promises, lies and straight up theft as well as passively – through uselessness, lack of care and utter laziness.

    This theft is all encompassing – the government is stealing our money, our safety, our health, our water, our power and our basic human rights. They are stealing our very lives and the lives of our children and grandchildren.

    I salute those standing up against this evil that calls itself our government.

    Amandla awethu.

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