Pressure on new administrations as certain KZN municipalities futures look bleak

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Auditor-general (AG) Tsakani Maluleke has called on all role players across local government for an ‘accountability ecosystem’ to diligently play their part in ensuring responsible government spending. This while jointly “improving service delivery and quality of life for all South African citizens”.  

However, concerns are flying following Maluleke’s report, explaining the dire financial position of 28% of South African municipalities. The report states that the situation is so bad, “that there is significant doubt whether they will be able to continue operating, as a going concern in the near future.”

This effectively means that such municipalities do not have enough revenue to cover their expenditure and that they owe more money than what they have. Many of these municipalities have been in this dire financial position multiple times during the previous administration’s term.

According to the AG’s 2020-2021 Consolidated General Report on Local Government Audit Outcomes, KwaZulu-Natal municipalities with the aforementioned “going concerns” are as follows:

  • Mpofana
  • Ulundi
  • uThukela
  • Ugu  
  • Msunduzi
  • uMkhanyakude
  • Newcastle

In her report, Maluleke highlighted that the main source of revenue for most municipalities are the rates and taxes paid by property owners and consumers of municipal services. “The problem with own revenue is that municipal consumers (including government institutions) are not paying what they owe – this has been a trend for many years and has been made even worse by the economic downturn caused by the COVID-19 pandemic.” 

In laymen’s terms, this means that while a municipality’s revenue might look healthy on paper, the money does not reach the bank.

“We estimate that only 36% (R109,64 billion) of revenue was recoverable, and it took municipalities an average of 213 days to collect amounts due to them. In 2020-21 alone, municipalities wrote off R41,28 billion in debt because it was never paid to them,” Maluleke explained.

Touching on several focal points, Maluleke has called on all role players in the local government to ensure accountability for government spending.

Furthermore, the latest AG report reflects on the audit outcomes over the five-year term for the previous local government administration. Therefore, Maluleke, says the trends in the report demonstrates that the fourth administration (2016-17) left municipalities in a worse financial position than when they took office.

“The lack of improvement in municipal outcomes is an indictment on the entire local government accountability ecosystem, which failed to act and arrest the decline that continued to be characterised by service delivery challenges in municipalities,” stated Maluleke.

Thus, the report “presents a not-to-be-missed opportunity for the new administration to address the already reported audit findings,” and she called on all role players involved in local government to heed the AG’s call to action to transform local government and improve people’s lives.

It should be noted that the AGSA’s audit outcomes are based on the audits performed on the quality of financial statements and performance reports, and on compliance with key legislation.

Likewise, Maluleke says some municipalities improved their audit outcomes, just to regress again in later years. Overall, only 61 municipalities had a better audit outcome in 2020-21 than in 2016-17, with 56 now having a worse audit outcome.

With government entities such as Newcastle, Ugu and Msunduzi municipalities showing financial strain, alongside other struggling municipalities across the country, Maluleke highlighted the report was not only intended for local government leaders but rather equally important for national and provincial leadership, plus community organisations.

“We have engaged with critical stakeholders in the accountability ecosystem and called upon them to be effective and deliberate in executing their mandates in order to transform local government and improve service delivery to citizens. We will monitor the implementation, effectiveness and impact of the commitments made by various leaders over the term of the new administration,” Maluleke concluded.

To read the full report, click here.

With a sizeable task a head of them, let us hope the new administrations can go beyond expectation and turn this troubling scenario around.

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