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Treasury to strengthen its oversight of municipal finances

25 August 2020 - 08:33 By LUYOLO MKENTANE
Johannesburg. Picture: SUPPLIED
Johannesburg. Picture: SUPPLIED

The Treasury has agreed to take a more active role in monitoring  municipal finances to help bring back financial stability and address  the twin problems of corruption and political interference.  

On Friday last week finance minister Tito Mboweni convened a meeting of his budget forum, a platform that comprises the minister, the country’s nine finance MECs and representatives of the SA Local Government Association (Salga), an employer body representing the country’s 257 municipalities, to discuss their sustainability.

The forum resolved that the Treasury will take a lead on local government financial management matters, while the department of co-operative governance & traditional affairs will monitor  governance and service delivery efforts.

Minister Nkosazana Dlamini-Zuma’s spokesperson, Lungi Mtshali, on Monday told Business Day the department of co-operative governance & traditional affairs is happy with the streamlining of roles. “If we are to effectively deal with issues at municipalities, we must be clear what roles each department must play,” Mtshali said.

“What came out of the meeting is that Treasury agreed with us that we should not duplicate our roles in municipalities but rather we must complement each other.

“Our role is clear: we want to help municipalities improve the quality of their services and governance. The financial management aspect is Treasury’s function,” said Mtshali.

The Treasury said the meeting resolved that a “clear distinction” be made between the roles of politicians and that of administrators to resolve governance challenges in municipalities.

The parties agreed that “political intervention” should deal with political challenges that can’t be solved administratively.

The meeting resolved that it would require collective action to enforce legislative measures to address “consequence management and instil accountability, particularly in the case of poor service delivery, wastage of public funds and corruption”.

In his recent report on the municipal audit outcomes for 2018/2019, auditor-general Kimi Makwetu stated that only 21 of the 257 municipalities in the country achieved a clean audit, with irregular expenditure accounting for R32bn. More than R1bn was spent on consultants.

The total revenue for municipalities (excluding equitable share and conditional grants) in the 2018/2019 financial year was R226bn. The national government financed the municipalities through equitable share grants of R55bn and conditional revenue grants of R43bn. However, 34% of municipalities ended the year in a deficit.  The total deficit in local government was R6.29bn, with wages making up the bulk of expenditure (R91bn).

Municipalities, which are at the coalface of service delivery in the country, have been marred by allegations of corruption, maladministration, mismanagement and inefficiency.

The Treasury wants current legislation to be enforced to address corruption and limit the influence politicians wield on municipal governance, to bring stability in SA’s beleaguered local government sector.

A shortage of skills in critical sectors such as financial management continues to hamper the functioning of municipalities. In June, deputy auditor-general Tsakani Maluleke painted a bleak picture of the state of municipalities. “While we must appoint people with skills, we must make absolutely sure that the environment in which they operate is stable,” Maluleke said.

Municipalities are among the worst  affected by Covid-19, seeing  a significant cut in revenue collection as businesses closed down and jobs were lost during the national lockdown.

In an effort to shield local governments from the harsh effects of Covid-19, The Treasury has already told municipalities to apply for an exemption from the 6.25% wage increase for 2020/2021, a move that has since been rejected by unions.

Salga spokesperson Tebogo Mosala did not immediately respond to a request for comment on the outcomes.

Karen Heese, an economist at Municipal IQ, a web-based data and intelligence service that monitors and assesses SA’s 257 municipalities, said the resolutions were commendable. “What is required, between the lines, is political will to ensure that the strategy materialises ... Only with top-level political attention will the interventions yield results.”

Koena Ramotlou, general secretary of the SA Municipal Workers’ Union, said that if the Treasury and the co-operative governance & traditional affairs department had “genuine intentions” of solving municipal problems, they should have consulted all stakeholders, including the unions.

“We need to see people being held personally liable for fruitless and wasteful expenditure in municipalities. As things stand, people continue looting with impunity.”