Municipalities are ‘teetering on the brink of collapse’

The auditor-general has warned local government could be headed for financial ruin, with the latest municipal audit results having revealed high levels of noncompliance, along with a R7 billion spike in irregular expenditure.

“The financial statements show increasing indicators of a collapse in local government finances,” Kimi Makwetu wrote in his media statement of the 2018- 2019 results.

The financial health of 79% of the country’s municipalities was, at best, “concerning” and, at worst, required “urgent intervention”. Just under a third were in a “particularly vulnerable financial position”.

Irregular expenditure increased from R25.2 billion in 2017/2018 to R32.06 billion in 2018/2019, bringing the total amount that has accumulated over the years – and not been dealt with – to a staggering R65.59 billion.

“Many continue to extend contracts without following the due process. Many, even in municipal public accounts committees, tend to want to condone irregular expenditure from previous years without having undertaken the appropriate investigations to attach reasons why they want that irregular expenditure to be condoned,” Makwetu said, during a briefing on the results.

Makwetu titled this year’s report “Not Much to go Around, Yet Not the Right Hands at the Till”.

He said on Wednesday although the country’s municipalities had limited resources, more could have been achieved during the period under review had those limited resources been “under due care and control with regards to the people looking after them, as well as those that supervise the financial administration of local government”.

He highlighted the challenges faced by municipalities in terms of revenue collection and said they had raised a collective R226 billion in the past financial year, but that most were doubtful they would be able to recover as much as 60% of this. It was inevitable, he said, that they would struggle to balance the books under these circumstances.

“A growing percentage of municipalities now are starting to spend more than the revenue that they are able to generate hence the total deficit across all the income statements of these municipalities is now sitting at about R6 billion,” he said.

In 2018/2019, 46 of the 257 audited municipalities performed worse than they did in the previous financial year and only 33 improved. The remainder either performed on the same level they did last year or did not submit their financial statements before the 31 January cut-off.

Once again, the Western Cape was the best-performing province and the Free State and the North West were the worst.

The auditor-general said some municipalities had hired financial consultants to try and improve their audit results, but slammed those who had still underperformed.

“In some cases, you will find municipalities spending up to R35 million on financial consultants but the result of their financial statements still remains a qualified or negative audit outcome,” he said.

Provinces ranked from worst to best, in terms of the percentage of clean audits they received:

• 2017/2018:
  – Free State, Limpopo and North West (0%)
  – KwaZulu-Natal (2%)
  – Northern Cape (3%)
  – Eastern Cape and Mpumalanga (5%)
  – Gauteng (9%)
  – Western Cape (40%)
• 2018/2019:
  – Free State and North West (0%)
  – KwaZulu-Natal (2%)
  – Eastern Cape (3%)
  – Limpopo and Northern Cape (4%)
  – Gauteng (9%)
  – Mpumalanga (11%)
  – Western Cape (45%)

– bernadettew@citizen.co.za

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