The financial management of South Africa’s economic hub is in a state of crisis, according to Stephen Sadie, CEO of the Chartered Governance Institute of Southern Africa, who has weighed in on the escalating dispute between Finance Minister Enoch Godongwana and Johannesburg Mayor Dada Morero.
The clash follows a strongly-worded letter from Godongwana to the city, expressing serious concerns over cashflow pressures and a controversial R10-billion wage agreement with the South African Municipal Workers’ Union (Samwu). Following a meeting described by Godongwana as “robust and productive,” the mayor agreed to consider remedial actions and submit a report. However, Morero continues to defend the wage deal and maintains the metro remains in a healthy financial state.
Sadie did not mince words when assessing the situation. “It’s a very strong letter. I’ve seldom seen such a strongly worded letter from the finance minister. So things must be dire,” he said. “If you had to ask me to pick a side of where the truth would lie, I would rather go with the finance minister.”
The numbers paint a troubling picture. The city owes creditors R25 billion but holds only R3.9 billion in cash, leaving a R21 billion shortfall. The Auditor-General has also flagged that the audited financial statements for 2024/25 remain unfinished, and the Johannesburg Stock Exchange has suspended the city from taking any further loans.
Sadie criticized the city’s governance, noting that while much attention has focused on the mayor, the accounting officer – City Manager Floyd Brink – bears significant responsibility, along with councillors who approve unrealistic budgets. “We have one of the best corporate governance codes in the world, the King Code, and it’s just a shame that the economic hub of South Africa is seeing its finances run into the ground,” he said.
The wage agreement, worth approximately R8 billion in increased salaries over two years, has left the mayor in an impossible position. Sadie explained that unions are unlikely to relinquish the deal easily. “If you do pay that, then you don’t have money for other things. If you push up rates and taxes, residents are going to get very irritated. Dada’s got his back against the wall.”
Municipal elections are just six months away, further complicating matters. Sadie noted the mayor is also contending with factionalism within his own party, with the deputy mayor reportedly eyeing his job.
Regarding potential solutions, Sadie said the city is technically insolvent. “If a company went down like this in the private sector, it would go into business rescue. For a city, you can’t close it down. We’re left with two options: administration or a government bailout.”
He expressed concern that a bailout would not address the root cause. “Bailouts don’t actually solve anything because the problem doesn’t get solved. There’s no accountability for a lot of these people who’ve been doing this stuff for ages. There’s been hardly any consequence management.”
Sadie warned that the poorest residents would suffer most. “It’s not people like you and me – professionals can make a plan around water, security, education. The poor are going to suffer, and it looks like there’s going to be a lot more suffering in the coming months.”
He concluded that even a change in municipal government may not resolve the deep-seated issues. “The city of Johannesburg has thousands of people working for it, and corruption is not only at the top – it goes all the way down. No matter what happens with the elections, we’re going to live with these problems for some time to come.”