South Africa’s most important city in serious trouble 

Johannesburg is in a dire financial situation, with the Auditor-General (AG) giving the city a qualified audit opinion and sharing serious concerns about its ability to continue as a going concern. 

These concerns were coupled with the AG flagging issues surrounding the city’s R9.5 billion worth of write-offs, electricity losses of R5.7 billion and water losses of R2.8 billion.

The AG shared these concerns following the publication of the City of Johannesburg’s annual financial statements for the year ended 30 June 2025.

This set of statements was repeatedly delayed due to the AG being unwilling to sign off on the financials due to material misstatements and its array of concerns. 

The delay resulted in trading in the city’s bonds being halted on the JSE and contributed to its credit ratings outlook being downgraded to negative by Moody’s-affiliated GCR Ratings. 

Following the publication of the city’s audited financial statements, trading in its bonds was reinstated by the JSE on 29 May. 

Joburg deputy mayor Loyiso Masuku welcomed the lifting of the suspension and said it was evidence that the city is meeting its obligations.

“It signals to rating agencies, investors, and residents that the City of Johannesburg is stabilising governance, strengthening financial reporting, accountability, and sound financial management,” Masuku said. 

The AG’s concerns indicate otherwise, with its report calling into question Joburg’s continuation as a going concern. 

A going concern is an accounting term describing a business that is financially stable enough to continue its operations and meet its financial obligations for the foreseeable future without the threat of liquidation. 

This period is typically for the next 12 months, with doubts over an entity’s status as a going concern indicating serious financial trouble. 

The AG’s concern was primarily based on the city suffering significant liquidity challenges, with total borrowing nearing 45% of revenue, and both debtor collection days and credit payment days exceeding 30 days. 

Finance Minister Enoch Godongwana also recently revealed in a letter to Joburg Mayor Dada Morero that the city currently owes creditors R25.2 billion, but only has R3.9 billion in cash. 

“This is a market of severe financial distress, indicating that the city does not have the liquidity required to pay its creditors,” Godongwana said. 

The financial situation the city finds itself in has led some, such as Organisation Undoing Tax Abuse’s (OUTA) CEO, Wayne Duvenage, to say that Joburg is effectively bankrupt. 

The financial collapse of Johannesburg

Johannesburg’s latest set of financial statements lay bare just how badly a decade of mismanagement has impacted the health of the city. 

The AG gave the city a qualified audit opinion, which means it believes the city’s financials were reported fairly in all aspects, except for a select few where it did not comply with accounting standards or the auditor had insufficient evidence to verify information. 

In the case of Joburg, the AG listed one area in which it could not find sufficient evidence to verify aspects of the city’s financials and a few instances of material misstatements. 

The AG failed to verify the existence, accuracy, valuation, and allocation of sundry debtors amounting to R948 million due to inadequate documentation.

While possibly procedural, this indicates a lack of capacity in the city’s finance department, which could result in money being lost or stolen. 

In particular, the AG focused on material misstatements of general expenses and in the city’s performance reporting. 

These misstatements violate accounting standards, as the general expense transactions were incorrectly recognised in the 2024/25 financial year. 

This resulted in the general expenses and payables being overstated by R398 million, impacting the city’s budget balance. 

These issues are compounded by the city’s ongoing mismanagement, which can be seen in the deterioration of its infrastructure and failure to collect revenue. 

The AG noted that the city suffered electricity distribution losses to the tune of R5.7 billion, which includes R3.9 billion of non-technical losses from theft, bypassed meters, and billing errors. 

A similar situation played out regarding water supply, with the city suffering water distribution losses amounting to R2.8 billion. Around R2 billion of this was due to leaks alone.

It does not appear that the city will dig itself out of this financial hole anytime soon, with its budget for the 2026/27 financial year indicating more of the same.

The Johannesburg Crisis Alliance (JCA) said the budget fails to resolve the city’s underlying crises of infrastructure decline, weak financial management, rising debt, and poor service delivery. 

Rather, the budget focuses on expanding the size of senior management at its various entities, with the number of posts rising from 330 to 1,025.

Despite this increase, the city still has no roads or sanitation professionals, and no technicians for its roads, sanitation infrastructure, and refuse collection.