One South African city flushed R11 billion down the drain

Matlosana Local Municipality has recorded over R11 billion in fruitless, wasteful, irregular and unauthorised expenditure in the 2024/25 financial year.

This continues a trend of wasteful spending at the municipality, which was placed under interventions in terms of section 139 of the Constitution in 2024.

Matlosana is only one example of many municipalities in South Africa that struggle with wasteful spending, which has become a growing problem impacting service delivery across the country.

On Friday, 24 October, the North West Legislature Standing Committee on Provincial Public Accounts (SCOPA) said it was shocked by the rising wasteful expenditure at Matlosana.

Matlosana includes the towns of Klerksdorp, Orkney, Kanana, Stilfontein, Khuma, Tigane, Hartbeesfontein, and their surrounding areas, serving a population of approximately 398,676 residents.

The committee “expressed extreme shock” at the increasing and unmanaged unauthorised, irregular, fruitless and wasteful expenditure (UIF&W) of Matlosana.

In the 2021/22 financial year, the municipality’s UIF&W expenditure stood at R6 billion. By 2024/25, it had shot up to over R11 billion.

Over the same period, unauthorised expenditure at the municipality went from R3.1 billion to R6.3 billion, while fruitless and wasteful expenditure went from R85.6 million to R821.4 million.

Irregular expenditure remained largely flat at R3.6 billion, although R1.2 billion was written off and condoned in 2023.

Matlosana’s Mayor, Fikile Mahlope, attributed these increases, in part, to deficiencies and weak internal controls that are manipulated within the supply chain management.

“There are cases of financial misconduct that have been reported to the council, MPAC and FMDB for investigations,” Mahlope said.

North West Legislature SCOPA chairperson Smuts Matshe said there have been double payments of over R5 million to service providers using manual transactions to manipulate the financial system.

“It is sad that this seems to have been tolerated by the Municipal Council, and Junior staff members are often targeted for disciplinary actions when the actual Managers who initiated, supported, recommended and approved these illegal transactions appear to be protected,” he said.

“The fact that some Directorates and Divisions are allowed in some instances to procure services without involving the Supply Chain Management Unit and without any purchase orders, suggests deeper challenges in managing public resources.”

Not just one municipality

South Africa’s Auditor-General (AG), Tsakani Maluleke, has flagged the issue of fruitless and wasteful expenditure among the country’s municipalities for years.

In the AG’s PFMA report for 2023/24, she estimated that accounting officers and authorities managed an expenditure budget of R2.07 trillion in the national and provincial governments.

Of this total, fruitless and wasteful expenditure totalled R10.34 billion, with high-impact auditees responsible for R8.73 billion (84%) of this amount.

In the 2023/24 financial year, the total fruitless and wasteful expenditure for all auditees was R2.57 billion, an increase of 49% from the previous year.

The AG explained that two of the main reasons for money loss are weaknesses in project management and uncompetitive and uneconomic procurement practices. 

Another reason included was the overspending of budgets and poor financial health among the country’s municipalities.

The AG said that in 2023/24, departments incurred R7.19 billion in unauthorised expenditures – 57% more than in the previous year. 

In addition, public entities incurred irregular expenditure due to overspending of R0.17 billion in 2023/24, a decrease of 81% from R0.90 billion in the previous year.

“Over the administrative term, we consistently highlighted the lack of careful spending and the eroding of the limited funds available,” the AG said. 

“We continued to identify such practices at high-impact auditees – funds are spent, but service delivery does not improve. In simple terms, the quality of spending remains a problem.”

Municipal mismanagement has been at the root cause of poor service delivery across South Africa, as local government is often the only touchpoint individuals have with the state. 

Maluleke previously said local government is instrumental in providing communities with basic services, often being the authority responsible for delivering clean water, sanitation, electricity, and waste management. 

“After years of service delivery failures, council and administrative instability, financial mismanagement, and disregard for the law, this sphere of government faces greater demands than ever before to regain the trust of South Africans,” she said.