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Problems abound in municipal spending

The focus has fallen on the parlous state of local government this week. First auditor-general Terence Nombembe issued the general report on local government, in which only 13 of the 283 municipalities got clean audits, and then the energy and co-operative governance portfolio committees reported a growing backlog of municipal spending on electricity distribution infrastructure.

Some 177 municipalities are licensed to distribute electricity. In some municipalities this makes up the bulk of revenue. They use part of this revenue to subsidise other services, such as water and waste.

The problem is that more than 100 municipalities are killing off their golden geese by not maintaining, upgrading or expanding the distribution network, including substations, wiring and transformers.

The SA Local Government Association (Salga) said the backlog of infrastructure spending was growing by about R1.6 billion a year and totalled R37bn. On top of that, municipalities are taking strain because consumers are not paying for services: R76bn is owed to municipalities for rates and services, including R12bn for electricity. In some areas of the country breaking point may not be that far away.

There may be sufficient generation as Eskom gradually brings new power stations on line, but the distribution networks, particularly in the poorly-managed municipalities, could soon start breaking down.

So what is to be done? Salga believes the finance minister must ensure that there is tariff uniformity. One of the key reasons they are different is that the Eskom supply is relatively cheap to those municipal areas not licensed for distribution.

The other option is to outsource the service. This has already been tried in the form of EDI Holdings, which would have set up six regional electricity distributors. It just didn’t work because of the cross-subsidy problem and municipalities losing a key revenue stream. So frankly, the government doesn’t know where to go.

Another problem is political. The bulk of municipalities are run by the ANC. There is a strong correlation between overwhelming ANC majorities on many councils and poor service delivery and municipal fiscal management.

Where parties believe they are in power for ever, their elected councillors and appointed officials have grown arrogant and lethargic. It is also true that municipalities where there is political instability, such as hung councils where no party has an outright majority, tend to suffer from mismanagement as well.

Municipalities have become corrupted because jobs and contracts go to friends. City managers and chief financial officers are paid king’s ransoms, but they are not always properly qualified. They often get their jobs because of political credentials.

The auditor-general reported that R11bn was lost on irregular and unauthorised expenditure in 234 entities. If political buddies, either in the municipal officialdom or in contracted private companies, don’t happen to have the skills to upgrade transformer stations, to lay pipes or run sewage plants, the costs inevitably shoot up. So the easy way out is not to repair and upgrade, as is happening now with electricity infrastructure.

It is time for ordinary ratepayers and service fee payers to revolt. It may help to boot out incompetent councillors. Perhaps electricity funding should be ring-fenced so that municipal revenues don’t all flow into one pot, including the pot that pays exorbitant salaries. Those ring-fenced funds should be big enough to tackle the backlogs.

Answers to these problems are as clear as lightning.

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