Major red flags for some of South Africa’s biggest cities
While there have been some pockets of improvement, the Auditor-General has flagged that the audit outcomes of most metros in South Africa have worsened since the last year of the previous administration.
On Tuesday, 27 August 2024 Auditor-General (AG) Tsakani Maluleke briefed the Portfolio Committee on Cooperative Governance and Traditional Affairs (CoGTA) on the audit outcomes for local government.
Local government in South Africa is the sphere of government that is closest to the people as it serves citizens directly with essential services. It consists of metropolitan (metros), district, and local municipalities, plus municipal entities.
“Local government is instrumental in providing communities with essential services such as clean water, proper sanitation, reliable electricity, effective waste management, and well-maintained roads and municipal infrastructure,” said Maluleke.
However, “after years of service delivery failures, council and administrative instability, financial mismanagement, and disregard for the law, this sphere of government faces greater demands than ever before to regain the trust of South Africans,” she added.
While the office noted that while there are “pockets of improvement” in good governance at municipal level, it continues to see a trend of poor audit outcomes, with only 34 (13%) of South Africa’s 257 municipalities obtaining clean bills of health.
Of the 34 municipalities with clean audit opinions, 30 of them are repeat clean audits, which the AG said points to municipalities that have preventative controls and adhere to supply chain management and other controls,
However for most, fruitless and wasteful expenditure due to factors such as vacancies and lack of financial management skills, instability and political uncertainty accounted for R7.4 billion, up from R4.8 billion in 2021/22.
The outcomes of South Africa’s various municipalities are:
- 34 clean audits;
- 110 unqualified with findings;
- 90 qualified with findings;
- 6 adverse findings;
- 14 disclaimed with findings;
- 3 outstanding audits.
“Continued excellence at municipalities that maintained their clean audit status and a reduction in the number of municipalities with disclaimed audit opinions offer a further glimmer of hope. Otherwise, there is still little to celebrate,” said Maluleke.
Looking specifically at South Africa’s metropolitans, which serve the highest number of households and thus collectively most of the country’s people, a greater share of GDP, and bigger budgets, the report noted that metros’ financial health “remains concerning.”
Here’s a table summarizing the audit outcomes for the metros:
| Metro | Previous Year Outcome | Current Year Outcome | Reason for Change |
|---|---|---|---|
| City of Ekurhuleni (Gauteng) | Clean audit | Unqualified audit opinion with findings | Lapsed procurement and contract management controls |
| Buffalo City (Eastern Cape) | Unqualified audit opinion with findings | Qualified audit opinion | Internal control deficiencies |
| Mangaung (Free State) | Qualified audit opinion | Qualified audit opinion | Ineffective implementation of audit action plans, poor record keeping |
| eThekwini (KwaZulu-Natal) | Unqualified audit opinion with findings | Unqualified audit opinion with findings | No change in outcome |
| City of Johannesburg (Gauteng) | Unqualified audit opinion with findings | Unqualified audit opinion with findings | No change in outcome |
| City of Cape Town (Western Cape) | Clean audit | Clean audit | Sustained clean audit status |
| Nelson Mandela Bay (Eastern Cape) | Qualified audit opinion | Unqualified audit opinion with findings | Addressed multiple material misstatements in financial statements |
| City of Tshwane (Gauteng) | Adverse audit opinion | Qualified audit opinion | Implemented prior-year audit recommendations |
While Cape Town was the only metro to receive a clean audit, the AG did not mince her words when discussing the financial health of some metros.
“Two years into the administrative term, some metros still have instability in their councils and struggle to take the lead in ensuring service delivery to all their residents in a financially responsible manner.”
“At those municipalities that have not managed to move out of the disclaimed space, the lack of transparency, accountability and institutional integrity not only leads to non-delivery of services, but also harms the people these municipalities are intended to serve.”
“Little attention is paid to credible reporting on municipal performance, which is a key enabler of service delivery, transparency and accountability,” said Maluleke.
The report noted that despite implementing financial recovery plans and turnaround strategies, they struggled to improve their revenue-collection levels.
The AG said that the system for performance planning, management, and reporting in local government is well-defined but poorly implemented due to several issues:
- Inadequate Review and Reporting: Councils often fail to ensure performance plans are comprehensive, aligned with development plans, and have relevant, measurable indicators. They may tolerate non-submission or incomplete reports due to insufficiently trained members.
- Poor Systems and Record-Keeping: Municipalities lack effective systems and IT infrastructure for performance reporting, leading to manual, error-prone processes.
- Lack of Understanding and Skills: Officials and leaders often do not fully understand performance management requirements and lack the skills to prepare accurate plans and reports.
- Off-the-Books Planning: Some municipalities engage in unreported activities, avoiding scrutiny and auditing, and might remove indicators to avoid accountability.
- Misleading Reporting: Municipalities may report on different indicators or set low targets to create a false impression of performance and service delivery.
- Ineffective Oversight: Performance audit committees and internal audits are not adequately involved or effective in improving performance reporting and management.
- Limited Consequences: There are few repercussions for providing unreliable performance information or failing to meet targets.
“After years of service delivery failures, council and administrative instability, financial mismanagement, and disregard for the law, this sphere of government faces greater demands than ever before to regain the trust of South Africans.”
“We call for stability in the institutions supporting local government and urge them to continue – and further intensify – their efforts in monitoring, supporting and overseeing this sphere of government,” said the Office of the Auditor-General.
Government response
Following the briefing, the Portfolio Committee on CoGTA released a statement calling on the department for a plan of action to address the situation.
“The plan must include measures to eliminate repeat disclaimers and repeat offenders and should also address the inappropriate use of consultants [and] address the problem of political interference, introduce measures to assist municipalities on the use of their conditional and other grants and include consequence management measures,” said the committee.
“A report on the criminal investigations into unauthorised amounts identified in the report should also be tabled with the portfolio committee in the near future,” they added.
Recently, CoGTA Minister Velenkosini Hlabisa said that his focus is on addressing dysfunction in municipalities.
He said that the department will provide Municipal Support and Intervention Plans (MSIPs) and financial recovery plans. He also said that municipalities that remain “dysfunctional” risk being dissolved and put up for reelection.
The CoGTA budget is R395.7 billion, with R379.61 billion allocated to municipalities.
Hlabisa also stressed the need for improved planning and resource mobilisation to ensure effective use of taxpayers’ money and infrastructure development.
Read: The best-run municipalities in South Africa – with more than half in one province
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