The outcomes of the latest Auditor-General report revealed that the country’s municipalities are in their worst state in five years and that many of them are barely functional.
Auditor-General Kimi Makwetu‘s findings showed that 31% of the municipalities were not financially viable. Of the 257 municipalities across the country, only 33 received clean audits which means only 13 % of South Africa’s municipalities are in full compliance with the relevant legislative requirements. The report also showed that irregular expenditure increased from R 16-billion the previous year to over R 28-billion this year.
In his 2018 budget vote speech, Minister for the Department of Cooperative Governance and Traditional Affairs (CoGTA) Zweli Mkhize, said his department and the National Treasury had “jointly identified 87 priority municipalities which are distressed or dysfunctional and require urgent intervention”. He added that in dire situations where municipalities fail, provincial governments intervene through invoking section 139 (1) of the Constitution.
Section 139 (1) states that if a municipality cannot and does not fulfil its executive obligation in terms of the constitution or legislation, the relevant provincial executive may intervene by taking any appropriate steps to ensure fulfilment of the obligation. The section goes on to say the necessary steps to ensure fulfilment can include dissolving the Municipal Council and appointing an administrator but only if exceptional circumstances warrant such a step.
A number of municipalities are currently being administered by provincial governments under Section 139 (1). However, do these interventions bear fruit?
In their article titled Section 139 interventions in South African local government, 1994-2015, Wynand Greffrath and Gerrit van der Waldt state that despite numerous policy initiatives, turnaround programmes, and special projects that the department and its predecessors have conceived and implemented over the last ten years, these strategies have proven ineffective in turning the tide of local government underperformance.
The two even suggests that there has been an increasing trend in provincial interventions which, if extrapolated, is likely to increase significantly in the future. This must be a subject of grave concern for all stakeholders who are involved with municipalities and local government in general.
Their study shows that there has been a total of 74 Section 139 interventions that have taken place between 1998 and 2015, however since 2009 there has been a significant increase in the number of interventions.
This suggests that conventional policy initiatives aimed at strengthening local governance have proved ineffective.
With this worrying picture, we need to dig a lot deeper to find out what obstacles prevent these interventions from succeeding and taking municipalities out of difficult circumstances. As much as we understand the impact and negative effects of political issues surrounding local municipalities, we believe the focus should be on the administrative capabilities of those who are charged with running a municipality.
We at Ntiyiso believe that the remedy for these failing municipalities is not to jump into a financial recovery plan. There are a number of key questions that must be answered before such a plan is crafted otherwise it may become just another plan that instead of resolving issues may cause more turmoil.
What we should be asking is why do municipalities fail, given the myriad of legislation that exists within the local government space. Municipality failure should be rare given the number of stakeholders who play a role within local government - from national, provincial to other independent parties, bodies, associations, funders and private sector service providers.
Having read through a number of financial recovery plans of different municipalities across the country our view is that despite the great effort of compiling these plan, the implementation thereof has failed spectacularly.
A financial recovery plan cannot stand the test of completeness, accuracy and validity unless the team that compiles it has the necessary expertise about local government and has spent the right amount of time analysing the root causes of failure within the municipality. This ought to be reciprocal of the municipal officials who will participate in the compilation and implementation of the financial recovery plan, they too must be equally skilled and experienced.
Firstly, stakeholders within the municipality must be inducted on what a financial recovery plan is, what it is not and why it must be developed. Municipal officials are the ones who must implement the plan and as such, should understand the inputs that are required and be able to interpret the outcomes and distil them into key actions.
The main issue here is most municipalities may be experiencing the process of compiling a financial recovery plan for the first time bar a few which have had interventions more than once. As such, the chances of understanding the process are slim.
Secondly, these financial recovery plans are compiled in the midst of great uncertainty, institutional instability and mistrust among stakeholders. The environment under which the plan is conducted may influence the outcomes greatly and determine whether the correct diagnosis and root causes are outlined accurately. There needs to be a complete openness and frankness when tackling even the most disconcerting of issues so that the correct actions are taken.
Thirdly, the majority of municipalities served with Sections 139 (1) display distress that has been building up for a number of years. They display chronic weaknesses in governance; have unfilled vacancies in key positions and are not financially viable. Their audit outcomes are also littered with disclaimers and matters of emphasis.
We believe that all these factors can be resolved through proper induction programmes, deploying experts and implementing controls. However, there is one key factor which cannot be solved completely except with money. Since these municipalities are in financial distress and cannot meet their obligations, they are in serious need of a cash injection to restore normality and to deliver services!
Money cannot be raised easily or quickly and municipalities face the risk of falling into a trap of accepting cash from any institution that offers them costly financial assistance and thus risks being further indebted.
Funding for municipalities by intervening stakeholders who wield a funding muscle is a sticky subject. More often than not, funds are not released expediently into the municipality that is in need. This means the financial recovery plans might not have a budget to fund some of the activities that must be carried out. The lack of funding stunts any chance of a municipality producing proper results.
Finally, the support that is rendered to municipalities during the implementation of the financial recovery plan must be unwavering and unequivocal.
We must also emphasise that municipalities are commercial entities and require that whoever is an official or is deployed to assist with the implementation has basic commercial experience. This means that our municipalities need to be able to run along those commercial lines so we need to really look at implementing commercial principles within a legislative framework. So, municipalities must be assisted to a point where they work and municipal officials are left with the requisite skills to sustain the proper running. Often great plans are subjected to a box-ticking and half-hearted actions and thus fail to get off the ground, the assistance of external stakeholders must deal with this aspect.
We must also at what characterises well-functioning municipalities.
We at Ntiyiso Consulting believe that municipalities must have a good handle on the location or the geographic, demographic, psychographic characteristics of the customers they’re serving.
It is also critical that municipalities understand their own funding levers and sources, infrastructure capability and deficiency. They need to know what they have from an infrastructure point of view in terms of the age of that infrastructure, the maintenance of such infrastructure and the renewal and construction of new infrastructure requirements. This means municipalities need to have a long-term view of how they are developing themselves and how they will continue to develop themselves.
We at Ntiyiso Consulting believe that for a municipality to succeed, municipal officials must be adept and capable at understanding various methodologies aimed at problem-solving, implementation of new projects and turning around ailing functions. These methodologies are often not apparent as they are buried in the Constitutions, legislation, regulations and the work of various experts who are working in the local government space. The sum total of these documents needs to be packaged into toolkits which can be used to address a range of issues from setting up new municipalities, merging municipalities, implementing processes and internal controls, diagnosing dysfunctional areas etc.
By having a rich source of tried and tested methodology based toolkits and ensuring that municipal officials are proficient at using them even when faced with endless external challenges, the chances of municipalities failing will diminish.
* Holeni is a Senior Partner and Chief Revenue Officer at Ntiyiso Consulting.
** The views expressed here are not necessarily those of Independent Media.