Municipalities slide ever closer to total collapse
The auditor-general, conveniently for the government, waited until after the State of the Nation Address by President Cyril Ramaphosa, to release his annual report. The president should be appropriately grateful.
The bad news from AG Kimi Makwetu is that more municipalities are near collapse and non-compliance has increased. The AG’s staff is also increasingly being threatened with violence and hampered from doing its work.
The good news? Well, not much.
For the past six years, every single AG report into the financial state of municipalities has shown an accelerating downward trend in public finances. The AG has bemoaned the lack of decisive leadership at the very top of government and the fact that there are no consequences for corruption and incompetence. Every single year, nothing substantial is done, setting the scene for a major disaster.
According to the AG’s report, more than a third of municipalities are technically bankrupt, with expenditure exceeding revenue, and 18 have been placed under direct administration.
“There are increasing indicators of a collapse. We assessed 76% of the municipalities to have a financial health status that was either concerning or requiring urgent intervention,” Makwetu said.
Only 8% of municipalities received clean audits, down from 14%. Almost two-thirds of municipalities ignored previous instances of material irregularities identified by the AG, while three-quarters of them made zero effort to investigate misconduct and fraud identified by the AG.
While there will have been a faint sigh of relief that irregular expenditure dropped from R29.7billion to R25.2bn, the scale of deliberate dishonesty - rather than congenital incompetence - is staggering.
Almost a billion rand worth (R921million) of tenders were fraudulent awards to state-employed officials. Another R1.2bn of procurement could not be audited because of missing or incomplete documentation - in local government, “misfiled” or “lost” are synonyms for “stolen” or “shredded”.
More than 824 suppliers were identified as having made false declarations to win business. And in 88% of municipalities, the procurement processes were uncompetitive or unfair.
More than 80% of the R2bn illegally “invested” by municipalities in the plundered VBS Mutual Bank cannot be recovered. Of the 16 municipalities involved, 14 are now unable to pay creditors, maintain infrastructure or deliver services.
The big auditing firms have already taken a reputational hammering over complicity in state capture at SOEs and criminal incompetence or collusion with private sector shenanigans, like the Steinhoff collapse. They fare no better in their highly paid work for local government.
The R907m spent on consultants to do the work of municipal staff - up by 20% on 2016/17 - did not buy even minimal competence. Almost two-thirds (65%) of the reports on quality performance were “not credible”.
Fully two-thirds of the financial statements had “material misstatements” in the areas where the consultants had done the work. Four out of 10 municipalities have no road maintenance plan and almost half of them - 48% and 49% respectively - have no water or sanitation maintenance plans.
It’s clear from these AG statistics the recent collapses of water services in Makhanda and the KwaZulu-Natal South Coast are not anomalies. They are harbingers of nationwide collapses.
Municipalities owed R6bn to the water boards and, in March this year, R20bn to Eskom.
Behind this lies the culture of non-payment, tolerated for the past quarter century. According to the DA in the Free State, in many municipalities in that province barely 10% of residents pay their municipal bills.
The SA Municipal Workers’ Union (Samwu) warned this week that it would embark on strike action if workers at about 30 municipalities nationwide, who did not receive salaries this month-end, were not paid immediately. The president, says Samwu, has been “complicit” in failing municipalities by not unlocking more central government funding.
To even begin to deal with this morass of overstaffing, under-performance and criminality, the Ramaphosa administration will have to lock horns with powerful and arrogant unions that are nominally part of the governing alliance. Whether a former trade-unionist president will dare pick up the gauntlet remains to be seen.
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