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From bad to worse

South Africa’s municipalities spent R376bn last year, with bookkeeping related to 97% of it failing to get the clean-audit nod from the Auditor-General.

One does not need to work through thousands of pages of financial reports or hundreds of spreadsheets to come to the conclusion that the management of local and district municipalities is a total mess. Auditor-General (AG) Kimi Makwetu alerts us to this fact in the very first paragraph of a press release pertaining to his report on the financial management of municipalities for the year to June 2018.

And Makwetu is not shy to name the culprits in the report: “Local government leadership [political and municipal leaders, as well as provincial leadership] should take responsibility for the accountability failures of municipalities. It is their duty to turn the situation around.”

His report shows that the situation is indeed bad, and he comes to the conclusion that it is getting worse.

Only 8% of all municipalities in SA received clean audit reports, representing just 3% of the total budgeted expenditure of R376.5 billion during the year.

Read: Municipal sector faces collapse – Ratings Afrika

Only 18 of a total of 225 municipalities could achieve the minimum standards to receive a clean audit report from the AG’s office.

In the previous year, 14% of municipalities received clean audit opinions. While the AG states that 22 municipalities did indeed improve with regards to financial and administrative management, 63 municipalities did worse.

This is despite the disclosure in the AG’s report that municipalities spent nearly R1 billion last year on consultants to assist them in preparing their financial statements.

Makwetu highlighted a few examples of bad financial and operational management. One of the worst is the construction of a new sport centre in Oranjeville in the Free State – R21.7 million from a total budget of R27.9 million was spent, but a site visit showed that no construction work has been done.

The report discloses that none of the municipalities or district municipalities in the Free State received clean audit reports. Only 15% (down from 71% in the previous year) received financially unqualified opinions, meaning that the financial statements were quite accurate, but the AG found some other serious shortcomings in reporting standards, such as problems with supply chain management.

Irregular expenditure by municipalities in the Free State increased to nearly R1 billion during the year under review, prompting a stern rebuke from the AG. “The Free State local government environment displayed a total breakdown in internal controls as the province’s political and administrative leadership, yet again, exhibited no response to improve its accountability for financial and performance management,” says Makwetu.

“The leadership did not implement our recommendation to ensure stability. This resulted in the significant deterioration of municipal audit outcomes, service delivery and financial health.”

Situation critical (in three provinces)

He says the financial crisis in the province is critical. He says the same about North West Province (zero clean audits) and Limpopo (also zero clean audits).

The overall financial health of municipalities in the Eastern Cape also deteriorate: 76% had concerning financial health indicators or required intervention, compared to 66% in the previous year.

Only 2% of municipalities in KwaZulu-Natal achieved clean audits and they chalked up nearly R3 billion in irregular expenditure. Mpumalanga’s municipalities also fared worse with regards to financial management and service delivery.

The Western Cape is home to the best-managed municipalities, but financial management also slipped in this province. Only 40% of municipalities can boast clean audit reports, down from 70% in the previous year. Financial statements without financial qualifications were still high, at 89% (previously 93%).

Late submission of statements

Makwetu says that credible financial statements and performance reports are crucial to enable accountability, transparency and, ultimately, service delivery. “But municipalities are failing in these areas. Countrywide, 21 municipalities submitted their financial statements late and the financial statements of eight were still outstanding by January 31.

“The quality of the financial statements provided to the AG’s office for auditing was even worse than in the previous year,” says Makwetu.

Only 19% of the municipalities could present financial statements without material misstatements. The AG says the performance reports of 65% of the municipalities that produced these operational reports had such material flaws that they were not credible enough for any city council or the public to use.

Lack of consequences ‘a serious problem’

Another serious problem is the lack of any consequences for transgressions and irregularities within municipalities, says Makwetu.

“Our consistent and insistent calls for consequences for transgressions and irregularities were not heeded.

“We found that 74% of the municipalities did not adequately follow up on allegations of financial and supply chain management misconduct and fraud,” states the report. It also found that nearly half of all municipalities did not even have the required mechanisms for reporting and investigating transgressions or possible fraud.

Inadequate financial reporting hides ineffective service delivery that can lead to the total collapse of services.

Astral Foods recently warned shareholders that profit will decline by R85 million due to the lack of water supply from the Lekwa municipality in Mpumalanga, despite the fact that the Vaal River runs right through the middle of town.

Read: Dysfunctional municipality chokes Astral

The AG says that accountability failures in local government result in municipalities not achieving their objectives, which has a negative impact on the lives of citizens.

The report notes that there are increasing indicators of a collapse in local government finances. The AG concluded that 76% of the municipalities audited have concerns with regards to their finances, with many requiring urgent intervention. Almost a third of all municipalities are in a particularly vulnerable financial position.

Other problems include the collection of payments for services. “The inability to collect debt from municipal consumers was widespread,” says Makwetu. “In these circumstances, it is inevitable that municipalities will struggle to balance the books.”

Overall, 34% of municipalities disclosed that expenditure exceeded income, to the tune of R5.8 billion.

Impact on suppliers

The financial problems of local government also affected suppliers of goods and services to municipalities. Figures in the AG’s report show that creditors had to wait on average nearly six months for payment.

At the end of June 2018, municipalities owed suppliers a total of R48.5 billion – but had only R37.3 billion in cash on hand.

The creditors included an amount of more than R9.1 billion due to Eskom, which has cash flow problems of its own. Independent water utilities are in the payment queue for R5.9 billion.

Makwetu alludes to the fact that a lot of the problems are caused by the municipalities themselves, as they “are just not managing their finances as well as they should”.

Fruitless and wasteful means ‘lost’

A case in point is the fruitless and wasteful expenditure which amounted to R1.3 billion in the year to June 2018. This is money that is effectively lost (not to be confused with irregular expenditure where services were delivered with the only problem being that certain supply chain provisions were not adhered to).

The office of the AG also mentions the “potential” loss of R1.6 billion of municipality money that was invested with VBS Mutual Bank. “It significantly weakened the financial position of the 16 affected municipalities and had an impact on the delivery of infrastructure and maintenance,” says Makwetu.

The report lists a lot of consequences of negligent and ineffective financial reporting, from problems maintaining roads and water pipes to the development of new infrastructure and service delivery to all residents within a municipal area.

At the heart of the matter is the quality of public representatives.

City councillors who earn high salaries should have the right qualifications and enough experience to work effectively – and ensure that cities and towns appoint experienced officials and not only friends and family into lucrative posts.

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Went into a local JHB municipality branch today to log a query.

Offline. Were off all of Monday, half of Tues and most of today. They have no idea when they’re getting back on line.

The whole system seems headed for a crash any time now. The rot is no way confined to just financial management; it appears to be everywhere.

The municipal accounts are shambolic and errors are never corrected.

No matter. I’m sure that somewhere there’s someone thinking of making a plan to plan for something to be done by somebody about everything. Or something. Or nothing.

Or not.

Your last paragraph is awesome, made me laugh.

“Bookkeeping” New word for theft and corruption.

Many people (me including) have been and will be spending time and money on implementing controls to prevent the impact of municipal services declining, for example rain harvesting and solar.

The problem is that the govt will go and 1)make it harder to implement these measures and 2)impose tax on it as it is killing off the remaining income stream.

DA has already got this ball rolling in Cape Town, forcing everyone with a PV installation to have it registered with them, or face a massive fine.

Only a matter of time before you get hit with a “Sunlight Levy”, to pay for their fat R3Million executive salaries.

rfjock:

I can now, for the life of me, not think what a “PV” is. Also – who is this “DA” that “got the ball rolling”?

Ever since rates and taxes was introduced for farm properties we have diligently paid our dues on time. Every year we have to fight with the municipality to prove we have paid, are not in arrears with interest liberally charged, and then we have to correct the account before we pay again.
12 years later we are thinking WHY should we pay? I have no problem paying a municipality that keeps records, is able to issue a correct invoice and uses my rates to keep my local town clean.
Why must I pay when there are many people who have never paid and because the accounting system gets changed every 5 years and all records are lost, will never pay. They cannot prove these people have never paid. I am referring to my neighbors.

Should I break the law and join them? I would have a pile of cash in my bank account. Why should I pay a municipality that cannot record my payment, cannot give me an accurate, correct invoice for payment and steals or wastes my money?

Very definitely a pet irritation; particularly with EWC threatened by the ANC and smarmy Cyril. Totally dishonest.

The bigger picture that all these self serving, venal and dishonest ANC “leaders” do a terrible disservice to their “people”, the black African South Africans. It is too easy to see such a person appointed and dismiss them as “quota”, BEE, AA or cadre tenderpreneur because that is the example the ANC set. And, sadly, other parties like the DA copy.

There is no substitute for equality and no need to fear it unless you are going to game the system; ANC style.

I think we are beyond planning on how to plan on planning that elusive plan. We are now down to dreaming. No doubt those sat in front of the blank computer screen were extremely pleased to hear about this from Squirrel. Now they don’t have to feel guilty about nodding off now and again. Huh? Sorry I was busy dreaming.

With customized IT and some central monitoring by Treasury/equivalent, can it be that hard for there to be effective monitoring of income and expenditure of municipalities. Red flags would quickly appear when excessive money was being spent on a particular item, e.g. cars, under-collection for certain services or annual changes in particular items? Systems could be done cheaply cw money saved. The downside? Municipalities won’t like this!

I don’t see any issues and doing know why anyone is even given this 2 seconds of their time. The ANC is doing exactly what they said they will be doing and the media in general keep praising them by call them the ruling party.

It is often said that the ANC is the ruling party, this creates the illusion that they rule over everyone in society.
And this is where they themselves, the media and society hold them to account. A Ruler can not be measured against it self.

The anc is infact the governing party, which is where I hold them to account. Because they are poor and useless at it.

I believe that all party funding should be scrapped, that all the investment arms of parties and advertising should be band.

We don’t need political rulers we need governers.

according to CRANc everything is hunky-dory, especially the land reform programme which is brilliantly on track….ha! people are going to sit on land without any municipal services.

Why not steal 100 million or two, there are NO CONSEQUENCES. This mess of a farce called the democratically elected government is nothing more than a joke. Lets just say for one second that Cyril decides he has had enough of corrupt officials in Free State for example, and he fires the person in charge. That person goes to his band of merry men who go to their council or MEC and they have a meeting and instruct Cyril to reinstate him and or recall the president. In other words these thieves just dont care, they are untouchable.

So how much longer should the tax payers continue to fund these criminals ?

Not really a joke I’m afraid. This is a well planned and thoroughly captured Corruptheid State. A dictatorship posing as a sham democracy. The PC world out there pretends it cannot see, just to ensure they protect their very short term investments. But full junk status is nearly upon us and before we wake up from the Squirrel induced dream we will join the illustrious ranks of Zim., Venezuela, etc.

Exactly. Have a look at the Jibs and Mwebi case. Obviously corrupt, dishonest and venal so Cyril eventually fired them. They have gone all the way through the court system and the Concourt ruled they were unfairly dismissed as advocates. Good luck with trying to get any justice from these ANC / Zuma appointees in the system.

Ok ANC and EFF, so radical economic transformation is now complete and achieved.

Can we move on now?

Radical economic transformation has three steps:
1. Empty the state coffers ie tax payer’s money.
2. Plunder the savings of others ie pension funds.
3. Expropriate the assets of investors ie mines, land, etc.
Cycle complete.

We are judging municipalities according to western free-market standards. That is why, according to our standards, the result is a dismal failure driven by incompetent and corrupt individuals. We should see it from their side. They are from a collectivist culture, with socialist standards. They are very effective according to this set of standards. The economic concept of “The Tragedy of the Commons” explains what happens in a shared-resource system.

In a collectivist or shared-resource system, the most unscrupulous individuals, the scum of society, are enabled to rise to the top leadership positions. The system enables and motivates those who are willing to exploit the rest of the group. The system does not only enable exploitation and corruption, but it also motivates those exploiters to do so at a maximal rate. The aim is not service delivery or the improvement of the lives of the people. No, the aim is maximal exploitation for the benefit of the scum of that society. This is the inevitable results of a shared-resource system if accountability, efficiency, and ethical behavior are not strictly enforced. The ANC states that “the accountability lies with the collective”. Therefore, there is zero accountability. This is an incentive to loot and plunder.

We cannot expect anything else but the total destruction of municipalities under ANC rule. Take a look at the level of sophistication of infrastructure in the traditional homelands. This will indicate to you where the whole of SA is heading under ANC rule. People with a collectivist mindset make choices that lead them to use candles for light and the bush as a toilet.

I disagree that africans are from a collectivist culture, in my opinion it is more like a feudal system. The president, minister, chief, etc puts his relatives and favourites into positions where they can get rich and in turn they serve him by sharing the loot, supporting him in his battles against other chiefs and in so called democratic systems vote for him. As soon as he is dead or deposed the fight starts between his previous underlings to become the new chief. The average peasant or voter knows that whoever is in power is right and one should not question his orders or his motives. The king is dead, long live the king!

…or even better said: “The tribal chief is dead. Long live the chief!”

People are so keen to become public SERVANTS in SA they kill each other for the opportunity to serve.

Wonder why? Must be out of the goodness of their hearts.

There is a common thread throughout these shenanagins – the ANC.
The Zondo Commission has already heard damning evidence against some senior officials, and not 1 arrest !
Grahamstown and Port Alfred are synonymous of what the “new South Africa” looks like and it’s not pleasant.
Once all the coffers are bare we will all be losers the money stolen will be worthless – don’t they get it ?

The ANC corruption and mismanagement at the municipal level is absolutely killing our country and any chance of growth prospects. From non-collection to non-delivery to holding up private and public sector spend due to incompetence or ANC meddling, it is killing us.

Well there’s no doubt it’s enriching them so they don’t give a fig.

but the president starts his SONA speech with referring to apartheid and colonialism…..instead with starting at the bottom, the municipalities which is the first connecting node between the government and service delivery(economic growth). Didn’t even mention it.

Probably he has not yet discovered the latest terminology. Corruptheid! But I guess since he’s been part of it over the last ten to fifteen years, he’d rather not mention it. In any event, it is going strong so there’s no need to worry. Just leave the common citizens to dream while the members of the Corruptheid State continue to happily self-enrich.

Looking north, I wonder where South Africa would be today, had there not been apartheid?

Dare to imagine the alternate; if the NATS did not introduce this dreaded Apartheid …. How prosperous our country would be.

“Makwetu highlighted a few examples of bad financial and operational management. One of the worst is the construction of a new sport centre in Oranjeville in the Free State – R21.7 million from a total budget of R27.9 million was spent, but a site visit showed that no construction work has been done.”

So much for the New Dawn. As the kids say, I can’t even…

What we need to learn to do is look at that site. Quietly. For a long time. And then the dream will appear and you will see that stadium in all it’s glory. That’s what Squirrel wants us to do. “Dream a little dream with me”. With apologies to the Mamas and Papas.

The solution to fix the municipalities is simple:

Make the City and Town councilor positions honorary again, with no payment, as it was pre 94.

You attract a better class of councilor, someone with more life, business and professional experience that is there to serve the community, instead of themselves.

The current system is clearly not working. It was job creation for a few of the political connected.

The votes of the residents are way more than those of the councilors, boot them out.

No surprise re Free State. All is well following the legacy of Ace.

Wally

Two issues! One, the fingers of politicians especially anc, eff have no end to long fingers in the till!! Second, it is time to switch to crypto currencies where there will be an open ledger for all to see at any point in time. Those long fingers will be immediately spotted and cut off. Imagine finger less politicians !! Can’t think of anything better. Can you?

As supposedly and rumored “intelligent and succesful” individuals, can leaders like CR and PG be so far in denial as to think that they can successfully govern this country given the calibre of people they employ at all levels!!?? Or is the gap between them and their voters not big enough!?

SA is a One Party cultural State , and in Africa that only means Failed State!

Proof that Squirrel is well ensconced in a dream world. Not too many seem to want to join him though.

This is what happens when corrupt politician from the ruling parties deploy corrupt unqualified people and rent seekers and patronage supporters to run key municipality.All they are interested in looting the coffers with the blessing of their corrupt leaders,this is the cas in all municipality.They also employ un qualified cadre,relatives ,friends with no experience,who they can manipulate,and they have to do what whst their corrupt seniors want.Unless ANC cleanse itself,the whole municipal infrastructure ,will collapse,as as been shown,where the municipality cannot pay salaries.The municipality is just another get quick rich schemes for corrupt politician,who does not know how to creates their own wealth by working hard.Thisis just the beginning.

What do we, as a nation expect, when we had a President who stole massively in front of the nation and was then was heavily supported and protected by the ruling party. What do you expected when we tolerate the intolerable? Same with stuff like the taxis. The Government tolerates a lawless, violent, disgraceful industry so what happens: Innocent people die daily in taxi accidents and it becomes the norm.

Imagine if the CEO of struggling Romanian car manufacturer Dacia announced that his company would replace its failed production line by only manufacturing exact replicas of Toyota Corollas. It would be called the Colloric.

This would be achieved with the same workforce, designs, material and crash test dummies as in the past but supplemented with an enormous cash injection.

The workforce will include those who have been found guilty of sabotaging Dacia models in the past like putting sugar in petrol tanks, vomiting in the glove compartments and stealing vital components.

He took the liberty of cashing in the pensions of everyone except top management to fund his dream.

The incompetence of these people are staggering!!!!!They were handed everything in working order and look at it 25 years later!!!!!!!!!!!!

…the NEXT 25 years of Municipal ‘management’ worries me more.

Municipal taxes are clearly not linked to services. It simply pays a group of employees salaries for doing the minimum. Each year services fees increases more than inflation and hence we have stealth expropriation since a reduction in disposable income and increase in costs for owning property is deflating property value. Given an annual municipal fee increase of 10% more than inflation, the share of municipal fees will be 10 times more in 50 years time. In example, increasing from a share of 7% of disposable income to 70%! The only recourse would be to sell the property early and live in a tent somewhere.

Rates will not be paid. On the farms thank goodness it is easier than in towns. There are no services to cut off. Eskom will long be dead and we will have solar and generators like we had years ago.

I may have missed it, but I have not seen this on the frontpage of any newspaper. When are anybody going to be held accountable? This is beyond a joke. This, combined with the state of the SOE’s is the crisis in our country, but we constantly let ourselves be led astray by red herrings like land expropriation or free education.

You do not need a finance major to see that this is unsustainable.

“One of the worst is the construction of a new sport centre in Oranjeville in the Free State – R21.7 million from a total budget of R27.9 million was spent, but a site visit showed that no construction work has been done.”

Oh, be positive! Think of the beneficial impact on the liquor and prime meat trade, Mercedes Benz and BMW sales and “event organisers”.

Yes …. I wonder what Xanthia Limberg Water Resilience Advisory Committee (Chairperson) who is in charge of this department gets paid? And has no answer for this debacle. Antiretrovirals with your fish from Kalk Bay???

https://allafrica.com/stories/201906250238.html?fbclid=IwAR1ftgZtlYk_3muKbY9kSu-FkAoiZHLindBkkk3MXiSHLnG2SMykW4Xs_GY

“The ocean around Cape Town is so polluted that pharmaceutical and industrial chemical compounds are accumulating in the flesh of fish caught off the coast.

Scientists from the University of the Western Cape’s chemistry department have found that fish caught by small scale commercial fishers in Kalk Bay are contaminated by antibiotics, pain killers, antiretrovirals, disinfectants, and industrial chemicals.”

You want to talk about Mone….Sweden (swedush democratic Party) gave the ANC over $400million to fight against apartheid and Rhodesia.Holland,US and other countries financed the ANC. The ANC used those monies to buy bombs that killed and injured those people Church Street pretoria years ago. Sweden is liable to those injured people. Now for the Cherrie on top. The ANC and SWEDEN are responsible for the Peoples War which caused 20 000 black people to be killed in the Townships as they waged a war on the people to intimidate them so that only 1 party would be supported the ANC. Sweden was rewarded with the sale of their (arms deal)SAAB grippen fighters post 94 and Erikson the Cellphone company made huge amounts off SA! Sweden ,Holland ,USA and all other countries who were behind the killings of church street and 20000 blacks should compensate the victims maimed and families. The referendum held by DeKlerk was illegal and it was falsely communicated. It was vote YES to start negotiations with the ANC but in reality Deklerk made it YES to just handover everything to the ANC. Clive DErby Lewis, about to finally die from Cancer,in interview after his release from Prison reveals FWDeKlerk and it all.

Why would Sweden, a successful country with an excellent human rights record, do this?

Simply because your European has absolutely no understanding of Africa, nor the African. In their culpable ignorance they really believe we’re all just the same.

Misinformation via the media at the time. (Remember apartheid was EVIL…) Today SA must be heaven.

I refused to pay (farm property tax) from the very beginning which was some +20 years ago. My neighbors however paid because they DID NOT WANT TO GET INTO TROUBLE. Am I in trouble, NO, so, the moral of the story is STAND TOGETHER.
I have read an article stating that municipalities can no longer withhold transfer of the property due to none payment of taxes and also they can not keep you accountable for more than two years of none payment.

Oh dear…at this rate we will have all members of the public begging to bring back the Nationalist Party.
Or voting for the EFF so they can just help themselves to the little that is left!
This is very sad for Mandela and his legacy. So much hope brought to nought.

Clearly a case of lack of qualified staff;
We all know of someone who has emigrated … when I ask why, these are the 3 common answers given;
1) – we all know the answer to # 1 so I will not even mention it.
2) – is the determined, sustained, unrelenting and ludicrous determination to remove qualified white employees (yes, not all émigrés are white) from any position of management, and yes, this is prevalent in the private sector too. Their want to participate and add a valued input to the betterment of SA is not wanted in any way at all.
3) – even after 25 years of a new government in charge we have yet to progress 1 meter in reconciliation, the past is still used at any and all opportunities to justify ongoing failures in the governing process of SA. No, it has nothing to do with what happen a quarter century or more ago, move on and take responsibility for your own inabilities and accept help from someone who is willing to contribute.
The determination to leave SA is a question of time … we have such a short productive time frame on earth that one simply cannot sit idle and wait for logic to prevail over prejudice.

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