South Africa

Leadership problem destroying South Africa’s richest city

Despite making more than enough revenue, many South African municipalities, including Johannesburg, are plagued by mismanagement, poor leadership, and financial instability. 

Only 34 municipalities received clean audits for the latest financial year last year, compared to 163 a decade ago.

In November last year, the Department of Water and Sanitation also warned that two of South Africa’s seven water boards were on the brink of bankruptcy due to mounting municipal debts, with municipalities reportedly owing water boards over R11 billion.

Even South Africa’s wealthiest city, Johannesburg, is suffering from rapidly decaying infrastructure, a major water crisis, and inadequate service delivery.

On the Moneyweb@Midday podcast, Wayne Duvenage, CEO of the Organisation Undoing Tax Abuse, commented, “so many things are going wrong in Joburg”.

Even though the city is riddled with infrastructural problems, residents who have tried to take the problem into their own hands have been punished for it. 

“They ignore the residents,” Duvenage said. “When residents want to fix potholes, for instance, they get slapped on the wrist and fined and told not to do these things.”

“I believe it is fixable, but we need urgent intervention in the city of Joburg now. It is still the economic powerhouse of South Africa, and it cannot be allowed to fail.” 

While many municipalities have attributed their underperformance, particularly in terms of poor service delivery, to a lack of funding, Duvenage said this isn’t the case. 

Going back 15 years, most municipalities were doing well and generally managing to pay their Eskom and water bills on time. 

In 2010, collective municipal revenue was about R154 billion. 

Looking at inflation, which averaged 5.2% annually, adding the average annual population growth of 1.6% and another 1% for development costs, municipalities should be earning about R442 billion today.

However, municipalities are actually generating R517 billion, 17% above what they should be making. 

In other words, the problem does not boil down to having enough money since municipalities have more than kept up with inflation and population growth pressures. 

The problem, Duvenage said, comes down to leadership. 

The Auditor General’s reports show that cities and towns with strong financial management and disciplined spending have received unqualified audits.

The Auditor-General boils these successes down to financial discipline, good governance, less political interference, stability and management. 

These municipalities have created areas that are conducive to growth, and they have reaped the rewards. However, other municipalities are squandering funds.

They are hiring consultants and service providers to provide infrastructure upgrades and services but not getting a return on that investment. 

Many towns and cities have municipal managers and mayors in many of our towns and cities that come and go, many times in the election period of 5 years. 

“When you have that instability, you cannot drive the programs that you want to put in place for growth.”

“There’s so much inconsistency, and that comes from political meddling. We see a lot of that in these broken municipalities.”

To address these issues, people with merit should be employed, he said.

While political parties will naturally employ those who align with them, it is important that they still focus on finding the best people for the roles that will carry out the positions that they are tasked with.

While the national government has tried to fix the situation by giving bailouts to struggling municipalities, Duvenage said that this is having the opposite effect. 

Municipalities who are behind on their Eskom and water bills are not forced to restructure and fix their poor financial management. 

As a result, they can keep squandering their money instead of paying what they owe. 

On the other hand, those who have kept on top of their bills see that poorly run municipalities are almost incentivised not to pay their bills, which makes them less likely to pay going forward. 

Duvenage said addressing this issue will require the government to focus on the fundamentals in addition to stopping these bailouts.

“What we need is Minister Hlabisa of CoGTA to start focusing on getting the basics right on those failing municipalities.”

These municipalities need help in fixing their problems, “but the starting point of that is you cannot leave the people who create the problems in charge of the solutions.” 

“You have to put in the right management leadership and focus on discipline and financial hygiene.” 

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