Two South African cities on the brink of collapse

The Auditor-General (AG), Tsakani Maluleke, has warned that South Africa’s metropolitan municipalities’ financial and service delivery-related performance is at risk.

Maluleke specifically pointed to the City of Tshwane and Mangaung metros, with serious doubts surrounding their ability to continue fully operating as a going concern.

In the AG’s Integrated Annual Report for the 2023/24 fiscal year, Maluleke said the country’s metros are plagued by poor revenue management, debt collection and budgeting practices, and financial losses due to poor-quality spending.

South Africa has eight metros that are responsible for service delivery to 8.9 million households, or 46% of the country’s households. 

The AG stated that the metros and their municipal entities were responsible for 57% of the estimated local government expenditure budget for 2023/24.

“Metros typically have better capacity and bigger budgets and can more easily attract suitably skilled and competent professionals,” Maluleke said. 

“Therefore, their audit outcomes are expected to be better, and they should be setting an example to other municipalities. However, the overall audit outcomes of metros have continued to regress since 2020/21.”

She explained that the AG’s office does not audit the performance of metros, but does work on their financial statements, performance reports, and infrastructure and environmental management.

Through this work, the AG identified that the financial and service delivery-related performance of these metros is at risk.

“Metros are plagued by poor revenue management, debt collection and budgeting practices, coupled with financial losses due to poor-quality spending,” she said. 

“Metros have listed debt and significant loans to service, while they are financially strained.”

Maluleke specifically highlighted the City of Tshwane and Mangaung metros, which have, for at least the past four years, disclosed significant doubt on their ability to continue fully operating as a going concern.

“Weaknesses in infrastructure project delivery and ineffective preventative maintenance are as common in metros as in other municipalities, despite having better access to resources,” she said. 

“Most metros did not adequately assess the condition of roads and infrastructure for solid waste and wastewater, and some did not have maintenance plans.”

For example, she stated that five metros did not comply with environmental management legislation, including not having valid operating licences for their wastewater treatment works and landfill sites, and not maintaining or safeguarding their wastewater treatment works. 

Since 2021, the AG’s office has notified accounting officers at five metros and three municipal entities of 15 material irregularities related to the poor management of wastewater treatment works and landfill sites.

Impact on South Africans

The AG warned that the mismanagement of South Africa’s metros can have devastating consequences for the households they serve.

“When municipalities do not effectively manage their performance, finances and infrastructure, it directly affects the delivery of key government priorities that are intended to improve the lives of South Africans,” she said. 

“Services and infrastructure in the basic areas of water, sanitation, waste management, electricity, housing and roads are not consistently and sustainably delivered, despite the budgeted funds being spent.” 

“Deteriorating living conditions and harm caused by polluted water sources and landfill sites are also widespread.”

The AG explained that when money and resources are wasted, there are reduced funds available for service delivery priorities, and eventually, this leads to a greater burden on taxpayers. 

She added that the lack of credible reporting on performance and finances weakens municipal accountability processes.

It also affects the councils’ ability to assess municipalities’ performance or make decisions in response to underachievement.

“We repeat our call from previous general reports that all roleplayers in the local government accountability ecosystem should work deliberately and with urgency towards a culture of performance, accountability, transparency and institutional integrity,” she said.