PRETORIA, GAUTENG — The South Africa local government sector is grappling with a severe governance crisis, according to a newly released Auditor-General report evaluating the sixth administration. The findings reveal a stark lack of progress in strengthening municipal oversight, with many councils failing to maintain adequate financial controls and accountability despite minor improvements in the baseline quality of submitted financial statements.
Audit Outcomes and the “Yellow” Category
When questioned during the briefing whether municipalities have gained better control over their expenditures compared to previous years, the answer provided was a definitive no. Out of the total municipalities assessed, 117 fell into a “yellow” classification. This indicates that while these councils submitted their financial documentation, they remain plagued by non-compliance and irregular expenditure flagged by the Auditor-General.
On a positive note, the Auditor-General noted some “green shoots” regarding the overall quality of the financial statements being handed over by municipalities. Ultimately, 39 municipalities successfully achieved a clean audit. Conversely, 1% of the municipalities received disclaimed audits, meaning their financial records were entirely below the required standards for the Auditor-General to process.
Hotspots of Mismanagement and Financial Leakage
The systemic issues are particularly acute in several major metros and provinces. The Free State, North West, eThekwini, and Johannesburg (Joburg) continue to battle severe operational deficits and poor accountability.
In the Free State and North West specifically, the briefing highlighted alarming trends where municipal budgets are being drained by ghost workers and flawed procurement processes. Furthermore, these councils are neglecting to upskill their existing workforce. Instead, they are funneling excessive funds toward external consultants without properly managing them, resulting in significant financial leakage during the consultation periods.
Regression in the Western Cape
The financial distress is not limited to historically struggling areas. The City of Cape Town in the Western Cape, a municipality renowned for consistently securing clean audits in the past, is now exhibiting troubling signs of regression.
For the 2023/24 financial period, the Auditor-General raised red flags regarding the integrity of the city’s infrastructure. Additionally, the municipality is encountering mounting financial pressures that are beginning to negatively impact its service delivery costs, signaling a worrying shift for a council that previously set the standard for municipal financial health.
The Auditor-General’s Call for Leadership Reform
To reverse these alarming trends and ensure municipalities work efficiently, the Auditor-General emphasized that the root of the solution lies in the caliber of municipal leadership. The tone set by elected and appointed officials directly dictates the institutional health of a municipality.
“The tone of leadership says a lot. It has a direct impact on what happens in that institution,” the Auditor-General stated. “And by tone, I’m talking about the quality, the caliber, the ethics, the priorities of the people elected and appointed to lead municipalities as mayor, the speaker, as councilors.”
The AG explained that this political leadership establishes the foundation for administrative appointments. “Together they also set the tone for who gets appointed at the administration being the municipal manager, the CFO and other agencies,” the AG noted. Furthermore, the political cohort determines what is tolerable and acceptable in terms of administrative performance, as well as what gets sanctioned and punished when the right things are not done.
To move the needle toward better performance, the Auditor-General urged a strict focus on the competence, expertise, and stability of administrative leadership. Ensuring that accounting officers and city managers possess the requisite skills is paramount.
By aligning high-quality executive leadership with skilled administrative management, the Auditor-General concluded, municipalities will start to make different choices, prioritize service delivery, and ultimately restore better accountability to the citizens they serve.