By Michael Sutcliffe and Sue Bannister
Each year around this time, the auditor-general releases the composite report of audit outcomes across the country’s 257 municipalities. This is an important document but, unfortunately, media attention provides only a few headlines for a day or two and then we carry on as if it is the same old, rather depressing, story.
In her Consolidated General Report on audit outcomes of local government for the 2022-2023 financial year, Auditor-General (AG) Tsakani Maluleke reported, correctly, “on weaknesses in service delivery planning, reporting and achievement; failing municipal infrastructure; and the increasing pressure on local government finances due to a lack of careful spending”.
All this impacts on services not being delivered, creditors not being paid and debts, such as to Eskom and Water Boards, escalating. Of course, the impact on businesses and the economy is severe.
The AG’s argument continues that the three main weaknesses that hold back local government progress are:
- Inadequate skills and capacity.
- Governance failures.
- A culture of no accountability and consequences.
It is critical that her call to action to redress the unacceptable situation becomes a call to all of society to not only demand changes but help in bringing about the changes we need.
Let us contextualise the AG’s audit outcomes because the reality is that there are significant differences across municipalities. For example, there are 27 municipalities which, in the year under consideration, spent almost R340 billion on operations and R30bn on capital expenditure.
The total expenditure of some R370bn is almost 75% of all monies spent by the 257 municipalities. The 27 municipalities range in size from Stellenbosch (175 000 people) to Johannesburg (around 4.8 million), and, collectively, they are our major economic centres. The National Treasury pays particular attention to the 27 municipalities each year when reviews of their medium-term and mid-year budgets are undertaken.
While we should expect that all the major municipalities have the requisite professional capacity to receive at least unqualified audits, 14 of the 27 largest municipalities received qualified audits or worse, with one (Madibeng) receiving an adverse finding.
Now let’s look beyond this using the index developed by the National Treasury which measures financial distress in each municipality every quarter and which allows one to track how each municipality is able to pay for operations, such as the purchase of water and electricity. The index ranges from 0 (no immediate financial challenges) to 4 (where a municipality is in serious financial distress) under sections 138 and 140 of the Municipal Financial Management Act.
Sadly, only one of the 27 municipalities (George) had no triggers for financial intervention in the 2022-2023 year. Over the past 10 years, more and more municipalities have fallen in terms of the criteria used to determine serious financial problems under sections 138 and 140 of the MFMA.
Our first call to action must be to the institutions which have the mandate to monitor local government, and ask them to be responsive and take urgent action which will result in real change. The actions do not have to be as drastic as implementing Section 139 interventions or installing administrators, but could instead focus on actions such as stopping payments of performance bonuses, not allowing the appointment of senior managers who do not have the requisite experience or professional qualifications, intervening when Municipal Staffing Regulations are not complied with, calling for specific consequent action against managers who are responsible and/or accountable, and so on.
The real effectiveness of the actions must also be continuously evaluated and reassessed, as there are many actions being undertaken which are not having the requisite effect.
In addition, the National Treasury, by law, must receive reports from municipalities on matters of serious financial transgressions. We must ensure that these are being actively reviewed, and actions taken with all arms of justice to ensure that particularly criminal investigations are urgently dealt with and prosecutions prioritised.
Our second call to action must be on building transparency. Imagine if every municipality provided on its website the cost of outsourced service delivery, such as the use of contractors and what it was costing us each time they got called out to undertaken repairs in each of our wards. Not only would we be able to monitor whether they have performed such services, but we could all ensure there was value for money as we started seeing where and how our money was being spent.
Third, we must also acknowledge the good work happening within our municipalities. This should look at the areas in which there have been accomplishments achieved through budgets and programmes, rather than solely concentrating on the shortcomings. All governments have to make difficult choices, and a key area needing greater focus is how to ensure funds are being spent efficiently, economically and effectively.
At the same time, we must also give consideration to some worrying trends in budgetary and expenditure patterns in municipalities. These include under-expenditure, a decline in the ratio of funds spent on capital projects and the reduction in repairs and maintenance expenditure. By way of example, in 2012/13 approximately R35bn remained unspent by municipalities. This grew to R71.4bn in 2022/23, representing 12% of the overall municipal budgets which remain unspent. Many of the key factors behind this include poor budgeting, reduced revenue collection and poor management.
There has also been a decline in the ratio of expenditure of operational to capital expenditure. And, at an operational level, repairs and maintenance expenditure patterns have remained low and, in many cases, have declined. This is an important factor behind water losses, electricity outages, sewerage spills and so on.
The solutions to the poor budgeting, expenditure and implementation needs more specific analysis of each municipality, but they include improving leadership, particularly at an administrative level, improving transparency and consequence management, and including support provided to reverse the trends. In this regard, municipal officials must account for what is not being done by starting with what is budgeted for.
Finally, we must collectively ensure that senior management are far more responsive, and that they should be held to account by their councils when they have failed to carry out their duties.
Overall, these are relatively simple strategies requiring an all-of-society approach, working with our municipalities to promote the vast amount of good being done, and to also reverse the unwelcome trends.
* Michael Sutcliffe and Sue Bannister are directors of City Insight (Pty) Ltd.
** The views expressed in this article do not necessarily reflect the views of IOL or Independent Media