Average delay on municipal infrastructure projects? Nearly two years

In March 2010, the City of Joburg started the R464 million Malibongwe Ridge housing project to build 7 227 units and provide affordable housing for the residents of the informal settlement Itsoseng. The planned completion date was March 2025.

Thirteen years later, only 1 368 units (19%) have been completed, and the people of Itsoseng are mostly still living in poor conditions.

The city nevertheless paid the contractor 98% of the contract value, which does not match the progress of the construction.

This is only one of several examples Auditor-General (AG) Tsakani Maluleke gives in her recent consolidated report on municipal audit outcomes for 2022/23 of poor project management that impacts the delivery of infrastructure that communities urgently need.

The AG’s office annually audits how municipalities manage grants as well as selected infrastructure projects.

“Despite this, we see limited improvement year on year, and this report again describes similar findings as those included in previous general reports,” she states.

ALSO READ: South Africa’s infrastructure needs a boost

Government grants

National government annually pays several grants to municipalities for infrastructure projects. These include general infrastructure grants, grants earmarked for bulk infrastructure projects, water and public transport and urban settlement grants for the eight metros to improve households’ access to basic services.

“Although municipalities are highly dependent on these grants to finance their infrastructure projects, they often do not spend all the funds they receive. Municipalities can apply to roll over any unspent funds, but if this is not approved, the unspent grant funding is returned to the department that had provided the grant, Maluleke explains.

In 2022/23, the underspending on such grants totalled almost R7 billion, with municipalities in the Free State regularly the worst performers.

The Makana Municipality, with its base in Makhanda in the Eastern Cape, did not spend a cent of its water services infrastructure grant despite persistent problems with water provision in this town.

Often the municipalities use the money for other purposes than it was intended for.

“Some local municipalities, such as Mohokare in the Free State and !Kheis in the Northern Cape, used grant money to fund their operations because of their cash-flow constraints. Other local municipalities, such as Masilonyana and Nketoana in the Free State and Sundays River Valley in the Eastern Cape, did not provide evidence that transactions met the conditions of the grant.”

This leads to project delays, and communities must wait longer for relief.

ALSO READ: Concern about continuing decline of municipalities – AG report

Infrastructure projects audit

Maluleke and her team audited 75 infrastructure projects valued at more than R10 billion, funded by a combination of grants and municipalities’ own revenue.

“Most of the projects were delayed, cost more than planned or were of poor quality. There were also delays in newly built infrastructure being put into use.”

Here are the results:

Despite their bigger budgets and ability to attract more skilled staff, the metros did not perform well.

According to Maluleke, “most metros did not effectively integrate planning and monitor budgets on projects”.

“This resulted in projects being delayed or cancelled as well as delays in appointing replacement contractors.

“Most metros had inadequate capacity in their infrastructure units due to high vacancy rates and staff lacking the required qualifications and experience.”

Poor project management impacts service delivery and increases costs, which means there is less money available for new projects, says Maluleke. “Poor-quality construction can harm those using the infrastructure (members of the public or municipal officials) and lead to increased costs to fix defects. Late commissioning delays the public’s access to new infrastructure and related services; and can result in unoccupied buildings being vandalised and equipment and supplies being stolen.”

ALSO READ: Almost 90% of municipalities are ‘distressed’ or ‘dysfunctional’

Underspending

According to the financial statements, the total value of municipal infrastructure exceeds R500 billion. Despite the National Treasury’s guideline that a municipality should budget 8% of the asset value for maintenance, very few municipalities do that. This is the result of financial constraints and poor financial management, according to the AG.

“In total, the 247 municipalities that we audited spent R17,06 billion on repairing and maintaining infrastructure assets, which is roughly 3% of the total value of these assets (slightly less than the 4% spent last year), with 36% spending 1% or less. Except for the City of Cape Town Metro in the Western Cape, none of the metros spent within the norm of 8%.”

The impact of this can be seen in poor water quality, increasing water and electricity losses that weigh on revenue, excessive replacement and upgrading costs and increased risk of mechanical breakdowns. It also increases the health and environmental risks.

ALSO READ: Hlabisa questions abilities of local government leaders as AG report shows no improvement in municipalities

George is a shining example

The AG holds George municipality in the Western Cape as an example of best practice.

The municipality started upgrading water treatment works at a cost of R263 million and planned to have it completed by February this year.

“During our site visits, conducted while the project was still in progress, the construction was at the required level of quality. The municipality has invested in project implementation and management, from planning the project to ensuring it is up and running and ready to serve the public.

“The project demonstrates the importance of having suitably skilled and experienced staff in key positions. All nine key staff members in the municipality’s water unit had engineering related bachelor’s degrees or equivalent qualifications and were registered with a professional body.”

This article was republished from Moneyweb. Read the original here.