Right hands not at the till in municipalities, says AG Kimi Makwetu
SA’s cash-strapped municipalities have enough assets to fulfil most of the basic needs of citizens but still need to deal with not having the right people in charge of their finances, auditor-general Kimi Makwetu said on Wednesday.
Makwetu released the outcomes of SA’s local government audits for 2018/2019 and painted yet another dire picture of municipal outcomes regressing further, reports BusinessLIVE.
Some of the problems were highlighted by Makwetu against the backdrop of the 2021 local government elections and the economic devastation caused by the Covid-19 pandemic.
Municipal finances are important as local government is at the coalface of service delivery and plays a significant role in ensuring the needs of residents and businesses are addressed, such as access to water, electricity and refuse collection.
One of the problems highlighted by Makwetu was that financial affairs at local government level were not properly administered. Financial administration was found “to be seriously lacking, with some devastating consequences”.
“This problem is compounded by the indisputable reality that the money allocated to the delivery of certain specified outcomes is no longer in the bank and that for which it was earmarked has not been delivered or achieved.
“There is not much to go around, yet the right hands are not at the till,” Makwetu said in his overview.
“The ultimate outcome of this is an inevitable downward spiral to a financial cul-de-sac that many of the local municipalities and districts have already reached across the whole country, with a few and limited exceptions.”
Makwetu explained during a media conference that proper financial controls help municipalities to prepare for a rainy day. If municipalities were disciplined, this could help them during hard times.
But the continued slippage in these controls would end up with bankruptcy as the consequence, he warned.
Some of the positives from the audits came from municipalities in the Western Cape, with the majority receiving clean audits, and Gauteng, which is the only province in which all municipalities received unqualified audits.
The Northern Cape, Mpumalanga, North West, the Free State and the Eastern Cape’s audit outcomes all regressed from the 2017/2018 financial year, Makwetu said.
The report found that the inability to collect debt from municipal consumers was widespread, and that municipalities would then struggle to balance their books. The audits showed that 34% of municipalities disclosed a deficit, with the total amounting to R6.29bn. The financial woes of municipalities in turn weighed heavily on creditors, with the average creditor payment period at 180 days.
“At year-end, R53.52bn was owed to municipal creditors but the cash available amounted to only R43.20bn,” the report said.
The report said while the poor economic climate does play a role in the deterioration of municipal financial health, “many [municipalities] are just not managing their finances as well as they should”.
“Government cannot afford to lose money because of poor decision-making, neglect or inefficiencies,” the report said.
Despite this critical point, fruitless and wasteful expenditure continues to rise, with R2.07bn lost by 200 municipalities over the past financial year, while irregular spending increased from R24.38bn in 2017/2018 to R32.06bn in 2018/2019.