Municipalities collapsing across South Africa

South Africa’s municipalities are in dire straits, with most of the problems they face linked to leadership instability and governance failures.

South Africa’s Auditor-General (AG), Tsakani Maluleke, recently outlined the problems facing local government in a conversation with the Centre for Development and Enterprise.

In her latest Integrated Annual Report for the 2023/24 fiscal year, Maluleke, who has worked in the AG’s office for over a decade, sounded the alarm about mismanagement at South Africa’s municipalities.

Specifically, she said many of the country’s municipalities and metros are plagued by poor revenue management, debt collection and budgeting practices, and financial losses due to poor-quality spending.

In conversation with the CDE, Maluleke explained that the design of local governance arrangements places tremendous responsibility and authority in the hands of the council, led by the speaker, and in the hands of the political executive leadership, led by the mayor.

“What we are seeing is that when a council is unstable and ineffective, it does translate into serious governance lapses at the level of the administration,” she explained. 

“When you’ve got a strong council, you are able to drive improvements. And then the reverse is true. When you’ve got a dominance of these governance failures, you’re unable to build institutional capacity.”

She explained that a weak council gives way to several other institutional failures seen at the municipal level.

This is because a weak or unstable council is unlikely to attract and retain the services of competent administrators and ensure that they do their work well and are held accountable. 

Therefore, a weak council cannot build the institutional capability a municipality needs to function well, as this directly impacts financial viability and, thus, service delivery.

“At the end of the day, we’ve got to deal with governance failures because if we don’t do that, you’ll never have the institutional capability that will make sure you get your projects off the ground on time at the right quality at the right price,” the AG explained.

Financial woes

She said a lack of institutional capability directly leads to poor financial management practices, a problem seen in many of South Africa’s municipalities.

In the 2022/23 AG report, only 34 South African municipalities received clean audits compared to 163 a decade ago.

“And that’s why, not only do you get your debits and credits wrong, but also you end up with huge financial viability problems,” Maluleke explained.

“You don’t pay your creditors on time because you’re running out of cash. You approve unfunded budgets. You end up with unauthorised expenditure or spending money on things you shouldn’t be spending on.”

This lack of financial viability impacts a municipality’s ability to deliver services efficiently and consistently.

“Performance becomes a problem because you’re not even planning to do the very basics, like maintain your infrastructure. So then service delivery suffers,” Maluleke said.

In her 2023/24 report, the AG explained that billions have been lost through non-compliance with legislation and suspected fraud among South Africa’s municipalities.

Since 2019, the AG’s office has identified 285 material irregularities in this area with an estimated financial loss totalling R8.74 billion.

The AG’s office also identified 79 material irregularities that were substantially harming local government accountability processes and financial health.

In addition, the AG found 80 material irregularities that were causing substantial harm to the public due to municipalities’ actions or inaction, most of which related to pollution of water sources (56) and mismanagement of landfill sites (20).

“It’s governance failures which need attention if we are to build institutional capacity and if we are to make sure that there are consequences for wrongdoing because that’s how you’re going to start building a better culture,” Maluleke said.