South Africa’s hidden toll of unreported corruption

Governance expert Sandile Swan said many of South Africa’s local government officials “eat in the dark” as their municipalities do not submit their financial statements for auditing, which could be to hide material irregularities and corruption.

Swan’s comments come after the Standing Committee on Auditor-General said in a statement last week that 268 material irregularities of non-compliance and suspected fraud were recorded between 2019 and 2023.

These irregularities have resulted in an estimated R5.19 billion of material financial losses.

However, Swan told 702 that several municipalities in South Africa had not submitted their financial statements for auditing.

The Auditor-General’s Integrated Annual Report for 2022/23 revealed that 15 auditees did not submit financial statements, 6 submitted their statements late, and 5 delayed their audit.

This means that the R5.19 billion figure may not tell the full story, as there could be far more material irregularities that have simply not been audited or reported.

Swan believes the legislation that safeguards against a disproportionate amount of material irregularities is sufficient, but there are no consequences for government officials who intentionally abuse their positions.

“The legislation itself is enough. The problem has been the fact that the people installed as councillors and mayors and, at times, the senior managers at municipalities are doing this intentionally,” he said.

“In other words, we are running a gangster state. So, when you have people who do not want to do the right thing, no matter which law you pass, it’s not going to help anything.”

According to Swan, some of the officials at these municipalities “eat in the dark”.

“They eat the financial assets of the nation in the dark because the Auditor-General cannot shine the light on those statements,” he said.

The Auditor-General also spoke about the impact of poor-quality financial statements on the organisation’s work.

“The poor quality of the annual financial and performance reports submitted by many of our auditees have a negative impact on the timeframe and quality of our audits because additional work is needed to respond to the risks posed by misstatements,” she said. 

“Persistently, we see internal control environments that are inadequately managed. Weak preventative controls and the disregard for our audit messages increase the audit risk profile.”

In 2022/23, only 18 local municipalities achieved a clean audit.