Municipal spending ‘out of control’


The enormous irregular losses shown by 170 South African municipalities during the 2021-22 financial year were enough to build two hospitals, pay the scholarships of 40 000 NSFAS students and the entire “sewage dam” outside Kimberley in the North -Cape to restore. This is what the Institute for Race Relations (IRV) said on Wednesday.

In addition, there would have been money left over that could have been used for other necessities.

However, unfortunately (and once again) this was not the case.

The IRV’s comments follow a recent presentation by the Auditor General (AG) in Parliament, which revealed that municipalities suffered a loss of R5.2 billion during this financial year due to mismanagement and corruption.

These losses, attributable to “material irregularities” (MIs, material irregularities) is attributed, has been suffered mainly due to goods and services paid for but never received; unfair and anti-competitive practices; and the payment of R1.6 billion (or 35% of the municipal finance staff’s wage bill) to consultants to do the same work as appointed staff are already doing.

The AG defines these so-called MIs as “financial (or possible financial) losses or significant damage (or possible damage) to public institutions or the wider public, due to the non-compliance or violation of legislation, fraud, theft or the breach of a fiduciary duty which identified by the OG during an audit”.

In the latest report, 268 of these MIs were reported during an audit process in the 2021-22 financial year, of which 194 MIs contributed to the loss of the stated R5.2 billion.

The MIs in the latest report are also significantly more than the 185 MIs reported in the 2020-21 financial year, and the 96 MIs reported in the 2019-20 financial year.

Although there were more audits (170 in 2021-22 compared to 94 in 2020-21) than in previous years, this still indicates that mismanagement and corruption are increasing sharply and that municipal spending is out of control.

Organizations are also concerned that only 21% of the 268 MIs had been resolved by November 2023, while steps taken by the municipalities concerned have only resulted in the recovery of R182.75 million in financial losses.

According to the report, by November at least municipalities had taken steps to prevent losses of R18.85 million, while processes continue to recover losses of another R310.16 million.

Should the latter be successful, it is estimated that more than R4.4 billion would still be lost.

‘Government can’t control spending’

The IRV says it is clear that the government simply has no control over its spending.

“The AG’s latest comments confirm the IRV’s position that the government has lost control over its income, and must be forced to exercise discipline to use fewer financial resources to deliver proper services.”

The IRV is also concerned about the 29 cases in the OG’s submission where MIs led to the pollution of water sources, as well as the poor management of landfills.

“Furthermore, the OG notes that these substantial irregularities, although many, are only representative of the sample municipalities of about 170 out of the total 257 municipalities nationwide.”

The IRV further says that National Treasury should heed the IRV’s call to lower VAT from 15% to 11.5%.

According to this institute, this will force the government to be more disciplined with its funds, by making fewer resources available to it. It will also alleviate excessive financial pressure on members of the public. In this way, people will have more freedom to spend their money as they wish.

“This will stimulate growth by increasing consumer spending and driving down prices of goods and services. Growth will also occur where the government manages public finances competently, minimizes losses (due to fruitless and wasteful expenditure) and gets maximum value for their money when purchasing goods or services.”

Statistics contradict presidential talk at Sona

The Freedom Front Plus says that although the OG has repeatedly urged municipalities to take corrective action, little has yet been done to recover losses.

“This is in sharp contrast to Pres. Cyril Ramaphosa’s statements on Thursday evening (during his state of the nation address) about the so-called successes of the ANC government’s district development model (DDM), which apparently aims to improve municipal service delivery,” said Michal Groenewald, the FF Plus’ spokesperson on collaborative government and traditional affairs (Cogta), said.

“More than R100 million has already been spent on planning this model without any significant results. If it is further taken into account that Cogta and provincial governments have wide-ranging powers to call municipalities to order, it is clear that there is no political will in ANC-led governments to curb the corruption and mismanagement.

“The ANC culture of lawlessness and the stripping of public resources is simply too deeply rooted at all levels of government.”