Covid-19 has unleashed a perfect storm of crises on SA’s ailing municipalities, combining existing inefficiencies, poor governance and corruption with rapidly diminishing revenues.
As the coronavirus financial crisis bites, municipalities will see their revenue from national government and residents decline significantly. Many receive their income largely from allocations from the national fiscus.
According to figures from Stats SA, the economy contracted 51% on an annualised basis in the second quarter of 2020, in the three months to June. This is the biggest downward cycle since World War 2. The Treasury has forecast a debt to GDP ratio of 81.8% this year, with the budget deficit set to reach 14.6%.
The unemployment rate is expected to rise to 50% post-Covid-19. Business for SA forecast up to four million jobs could be lost. At least a third of formal businesses may go under because of Covid-19. The UN Development Report, in a recent analysis of the South African economy, said Covid-19 may push about 54% of households out of formal jobs and into poverty.
Government’s Covid-19 stimulus package has not been deployed quickly, efficiently and imaginatively. This means large numbers of businesses, jobs and opportunities were lost before they could access government relief.
Furthermore, the government’s lack of a clear economic recovery plan, a parallel policy coming from the ANC which is clearly opposite to public-policy statements from Treasury and the Reserve Bank, and the return of power cuts, undermine any quick economic recovery.
The battered economy, collapse of businesses and rising unemployment have reduced revenue for the national fiscus. To rein in public finances, austerity will have to be introduced, budgets cut and spending and allocations reprioritised. There will be less income from national revenue allocations to municipalities.
Many also depend on income from residents and businesses. However, the Covid-19 financial crisis has cut the income they can expect to generate from them. Traditional municipal credit-control measures will be largely ineffective because many residents will simply not have the income.
Most municipalities, lacking skills and plagued by corruption, mismanagement and inefficiency, are not fit for purpose to deal with the impact of the national, household and business crises on their operations.
The latest auditor-general report, released earlier this month, said only 21 municipalities received a clean audit in the 2018-2019 financial year. More than R32bn was lost to fraud and corruption, and R11bn to unauthorised expenditure during the financial year. There are high incidents of irregular expenditure at the majority of municipalities.
The auditor-general cited lack of financial controls and project monitoring, supply-chain mismanagement and material non-compliance with legislation. There is ongoing lack of accountability and tolerance for transgressions.
But the impact of Covid-19 will not only be financial; it also brings social and political crises. The mass business closures, rising job losses and public-finance austerity will change the country’s political mood. We are entering a new era, in which citizens will be more demanding of public service delivery. Yet municipalities will have less revenue for service delivery, infrastructure and maintenance.
Given many may lose homes, we may see more land-grabs, the rise of informal settlements and rates, utility and service-payment boycotts.
There will be more scrutiny by citizens of government decisions, appointments and tenders. There will be more protests about non-delivery, wrongdoing and corruption. Outrage against callous elected and public representatives will be more robustly and violently expressed. Furthermore, there will be rising expectations from citizens for municipalities to deliver.
Given many may lose homes, we may see more land-grabs, the rise of informal settlements and rates, utility and service-payment boycotts. Covid-19 may also herald a sea-change in local politics. It is likely the next local elections will unseat many councillors and mayors, seen as ineffective, corrupt and uncaring.
Municipalities must gather the political will to tackle corruption, inefficiency and mismanagement or face violent protests, boycotts and unseatings in the next local government elections. They need to fix financial, governance and human resources failures. They must ramp up accountability.
Most lack capacity because appointments to critical positions, contracts and development programmes are often made based on nepotism, political connectedness and party affiliation rather than on competence. This needs to stop.
Municipalities need to be more responsive to citizens and use limited resources more efficiently. Given limited resources, they will need to make catalytic investments, whether in infrastructure, new development projects or programmes. Where possible, neighbouring municipalities should explore shared services.
They must use citizens, communities and civil-society organisations more to provide services, maintenance and oversight. The media, civil society and citizens must monitor municipal services and municipalities must respond to criticisms, complaints and protests.
Municipal Integrated Development Plans are either absent or obsolete now. Municipalities must become more investor-friendly to attract investments. This will mean cutting red tape, operating honestly and ending corruption. They should focus on encouraging clusters of industries, whether expanding existing ones or searching for new ones, based on their endowments.
Building local recycling economies, where almost everything is re-used, fostering community co-operatives and social enterprises so communities can produce for themselves, and establishing community-based renewable energy-producing initiatives offer many new opportunities to municipalities.
Municipal social pacts, which are agreements between social partners, whether government, business, organised labour or civil society, at local level to jointly solve a development, social or economic problem should be considered. The perfect storm of crises Covid-19 brings to municipal economies cannot be solved by municipal governments alone — they need the partnership of business, civil society and local communities.
• William Gumede is associate professor, School of Government, University of the Witwatersrand, Johannesburg, and author of Restless Nation: Making Sense of Troubled Times (Tafelberg)
