R40 billion down the drain

South Africa’s government has spent over R40 billion to capacitate the state and improve service delivery. However, this has not resulted in significant improvements.

The Auditor General’s latest Consolidated General Report on Local Government Audit outcomes shows the government has little to show for this money. 

For over a decade, the South African state and municipalities, in particular, have been unable to provide high-quality service delivery in the country. 

One of the key reasons the government has identified for this is the lack of capacity at local government level. 

This is coupled with a lack of capability, whereby unqualified people are placed in positions with immense responsibility and fail to execute their mandate. 

Governance expert at the University of the Free State, Dr Harlan Cloete, explained that local government and key national institutions were hollowed out during the era of state capture. 

The South African state, at all levels, simply does not have the capacity to deliver basic services and implement policy. 

Cloete explained that the lack of capacity and capability is the root cause of many governance failures in South Africa, but the government has failed to address it. 

This is despite the government spending over R40 billion in the past decade to capacitate the state and ensure its employees are more capable. 

Cloete highlighted that the work environment remains inherently toxic even when government institutions and departments are strengthened, and employees receive additional training.

This leads to decreased productivity among staff and reduced efficiency in government services, which in turn stifles economic growth and worsens the quality of life for South Africans.

In some cases, unqualified individuals are employed, and no matter how much the government invests in improving service delivery, these employees fail to meet the required standards.

One notable example of this decline is South Africa’s state-owned enterprises (SOEs), which suffer from governance and leadership challenges.

“Evidence suggests that deliberate efforts were made to destabilize SOEs, with funds being diverted to benefit the elite,” said Cloete.

This issue has also spread to other government institutions, especially at the local level, where oversight is weaker.

Such a lack of capacity at a local government level was reflected in the Auditor General’s latest report on the financial state of municipalities. 

Auditor General (AG) Tsakani Maluleke revealed that 87% of South Africa’s municipalities failed to receive a clean audit. 

While 45 municipalities have improved their audit outcomes since 2020-21, 36 have seen their performance decline. The report said that 77 municipalities made little effort to comply with key legislation. 

Compliance with legislation remained the biggest obstacle for municipalities, with 86% receiving material compliance findings, slightly regressing from 85% in the previous year and 83% in 2020-21.

Metros’ audit outcomes have worsened since the last year of the previous administration despite typically having greater capacity and bigger budgets.  

This indicates the lack of capacity is prevalent throughout local government and not just in poorly-funded municipalities. 

“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,” Maluleke said. 

Municipal mismanagement has been at the core of poor service delivery in South Africa, with local government often being the only touchpoint individuals have with the state. 

The financial health of municipalities has deteriorated rapidly in the past decade, with nearly 60% receiving clean audits in 2014-15. 

The Auditor-General at the time, Kimi Makwetu, said the improvements were driven by the government’s Operation Clean Audit, launched in 2009.

This initiative outlined clear steps to ensure that all municipalities received unqualified audits. 

While it failed to reach its target of 75% of municipalities having clean audits, Makwetu said it significantly impacted municipalities’ ability to produce financial statements on time and improve their audit opinions. 

Since then, little focus has been given to improving the capacity of municipalities, with many relying on outside consultants to produce financial reports and perform other functions. 

This not only costs municipalities hundreds of millions of rands in consulting fees but also means they cannot develop the capacity themselves.