Localised Corruption and the Decline of Municipalities
The office of the Auditor General for South Africa has released audit reports for Municipalities for the 2016/17 financial year. The news is not good and reveals corruption and dysfunction at a systemic level. Mphuthumi Ntabeni examines the situation and calls for the President to give the office of the Auditor General more resources and prosecutorial legal powers, as well as an added mandate to perform four-yearly skill audits for all government departments, municipalities and state entities. Otherwise we, he fears, we shall continue to fight a losing battle.
Reporting in Parliament on Wednesday about the general municipal audit of the 2016/17 financial year, the Auditor General (AG), Thembekile Kimi Makwetu, painted a grim picture of near financial collapse and lack of accountability in our failing municipalities. The Eastern Cape, followed by Limpopo and North West bares the brunt of this grim picture.
Out of the 257 audited municipalities by the AGSA, the audit outcomes says 45 regressed while only 16 improved. Only 33 municipalities (13%) received clean audits (i.e. they managed to produce quality financial statements and performance reports, as well as complied with key legislation). And the material non-compliance with key legislation was at 86% of the municipalities – this is the highest percentage of non-compliance since the 2012/13 financial year. Municipalities with material compliance findings on supply chain management increased from 63% to 73%.
Last week, in its proposed budget allocation of R83bn, for the 2018/19 financial year, the department for Cooperative Governance and Traditional Affairs (CoGTA) said many municipalities require urgent aid to avoid total collapse. CoGTA Minister, Dr Zweli Mkhize said that 87 of the country’s 226 municipalities (they've since been reduced) are dysfunctional or financially distressed. Meanwhile, the municipal wage bill has increased to R94.9bn.
Most distressing is the fact that the municipalities' dysfunction also contributes towards the vicious cycle of financial instability for other state institutions, companies and departments. For instance, the municipalities owe R23.6bn to Eskom and water boards alone. With a debt of just over R3.5-billion owed to Eskom and the Sedibeng Water Board for basic services, the municipality of Matjhabeng (Welkom) in the Free State is, theoretically, one of the worst-run municipalities in South Africa.
Unfortunately this is not limited to small municipalities. Ratings Afrika scored 8 metropolitan municipalities and was shocked to discover an imminent pending collapse of financial stability within the City of Johannesburg that has dropped from a score of 41 for the 2015/16 financial year to 24 out of 100 in the 2016/17 financial year. According to their ratings, only Mangaung (Bloemfontein) in the Free State, at 22 points, is worse off than Johannesburg among the metropolitan cities. In Limpopo six municipalities (Vhembe, Mopani and Sekhukhune district municipalities and the Bela Bela, Musina, and the newly-established Lim 368) are on the verge of financial collapse and need urgent bailouts, according to the Provincial government spokesperson, Phuti Seloba.
The Finance Minister, Nhlanhla Nene, earlier this year, on a meeting held with the city managers at a seminar in Johannesburg, indicated that some municipalities need to be pulled back from the brink of financial ruin. He blamed the state of these affairs mostly on slow economic growth and years of mismanagement at some state companies and municipalities. “This is what has weighed on government revenue and stretched the nation’s finances.” He said delinquent “cities owe utility companies such as power provider Eskom Holdings billions of rand, worsening their ability to deliver services.” Dr. Mkhize reported that 100 local municipalities, on the last financial year, incurred a 78% operational losses, with combined losses totalling R15.3bn, and liquidity deficiency of R22.4bn, which is the amount urgently required to bail them out if they are to avoid total collapse.
Most unfortunate is the politicised silence about what is going to be done to the culprits of mismanagement, to at least promote a culture of accountability. No government official here is talking about what steps are being taken to identify the white ants that are rotting the timber of municipality regulations and rules as clearly stipulated within our competent laws, such as the Municipal Finance Management Act (MFMA). This means that by this time next year we shall be in a similar situation, calling on government to bail out municipalities with taxpayer's money. This lack of accountability, beyond corruption, is the real cancer within the system of our governance as led by the ANC. Everyone knows in the end they will get away with corruption, especially if they are politically connected. So there is no fear to act as if there was a deterrent.
On his visit to Latin America Pope Francis identified political corruption as the number one cause for poverty in the region. He said there may be exceptions, “But by-and-large Latin America's political culture is sicker than it is healthy.” He pointed as evidence of this sickness to both the Peruvian and Brazilian presidents who went to jail after finishing their terms. Looked at from the African perspective where corruption is rampant and conducted with impunity, Latin America is at least showing signs of curbing their corrupt tendencies with strident popular demands of accountability. We live in hope that our former president Zuma will be the first example of a former president to go to jail for corruption, so at least we too may break the vicious cycle of the 'untouchable Big Man' of African politics.
The Compendium of the Social Doctrine of the Church teaches us that corruption: “compromises the correct functioning of the State, [and] has a negative influence between those who govern and the governed. It causes a growing distrust with respect to public institutions, bringing about a progressive dissatisfaction in the citizens with regard to politics and its representatives, with a resulting weakening of institutions.” (No.411) That, in a nutshell, describes what is happening in the South African political scene that directly translates into the poor governance we see. Corruption has placed a costly burden and handicap on our economic growth and human development. Hence we are among the countries with highest inequalities and social unrest in the world. And it begins at the local (municipal) level.
The first thing to do is to begin where the Health Minister, Dr Aaron Motsoaledi, began five years ago, with a full skills audit across relevant facilities, laying off the dead wood, firing political appointments, and re-opening top posts based on skills and experience. It will be a costly exercise, but it would still be far cheaper than these perennial full financial rescues. Besides, looking at the health ministry books and service delivery operations it is obvious that the department has turned the tide. And it is also high-time the president beefed up the AGSA office with resources and prosecutorial legal powers, giving them an added mandate to perform four-yearly skill audits for all government departments, municipalities and state entities. Otherwise we shall continue to fight a losing battle.
Image: Adapted from pages 29 and 31 of the Local Government Handbook 2018/Yes Media.
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