Municipalities wasted R4.7 billion last year

Fruitless and wasteful expenditure more than doubled from R2.15 billion to R4.7 billion in the 2021/2022 financial year, with corruption at the local government level continuing unabated. 

This is according to the auditor-general, Tsakani Maluleke, who briefed Parliament on the audit outcomes of municipalities in South Africa yesterday. 

A rise in fruitless and wasteful expenditure was coupled with increased consulting fees at municipalities, totalling in billions. 

Fruitless and wasteful expenditure refers to expenditure that was made in vain and could have been avoided had reasonable care been taken. 

Examples include paying inflated prices for goods and services or litigation that could have been avoided. 

Maluleke said that the dismal financial performance of South Africa’s municipalities was a “reminder of rampant corruption that continues to plague the country”. 

The number of municipalities with clean audits decreased, which shows that “local government is going backwards”, according to the auditor-general. 

Only 38 municipalities managed to get a clean audit for the period in review, down from 41 municipalities in 2020/21.

The number of unqualified audits with findings decreased from 104 to 100, while qualified audits increased from 78 to 83.

“The financial health of municipalities continued to deteriorate, partly because increased economic pressures meant that consumers were not paying their bills, but also because of poor financial management,” the AGSA said.

The auditor-general said that the deteriorating financial performance of municipalities highlighted the lack of controls, regulatory frameworks, and effective oversight at a local level. 

The feedback from the auditor-general follows similar comments from the South African Reserve Bank (SARB). 

In its Monetary Policy Review, the Reserve Bank said that “many municipalities do not employ any discernible framework to determine the level of tariff increases”. 

Rate increases are seemingly made on a whim without consideration of the effects of such increases. This “suggests substantial deficiencies in the current regulatory framework”.

Light at the end of the tunnel 

Despite municipalities’ deteriorating financial performance, Maluleke said there are reasons to be positive. 

Provincial governments are taking an increasingly active role in supporting municipalities and enforcing financial discipline. 

Further, the National Treasury has taken steps to turn around failing municipalities and increased its levels of support to local government. 

These interventions have resulted in a decrease in the number of late submissions of annual financial statements from municipalities and an improvement in the number of disclaimers. 

This shows that local government is moving in the right direction, according to Maluleke. 

However, it is not enough to submit financial statements on time or have clean audits – municipalities have to deliver basic services.