PRETORIA – Cumulatively South Africa’s eight metropolitan municipalities incurred R3.5 billion of questionable spending in FY2012-13.
About 60% of the total municipal revenue last year went into the pockets of the metros, but the way they manage this R160 billion leaves much to be desired, the Auditor General (AG) showed.
Cumulatively they spent R903.2 million without authorisation, in other words not in accordance with the approved budget or the conditions of a grant. R2.6 billion of expenditure was incurred in contravention of legislative prescripts (irregular) and almost R45 million in a fruitless and wasteful manner. That totals more than R3.5 billion of questionable expenditure, which is 2.25% of revenue.
Cape Town was the only metro to receive a clean audit report after it addressed most of the issues identified in the previous year. Johannesburg, Ekhurhuleni, Tshwane and eThekwini got unqualified reports with findings and Buffalo City, Nelson Mandlea Bay and Mangaung received qualified reports with findings.
Cape Town and Johannesburg were the only two that improved on the previous year’s outcomes, while all the other metros maintained their positions.
AG Kimi Makwetu stated in his consolidated report on the municipal audit outcomes that there was a slight improvement in the occurrence of misstatements in the financial statements of the eight metros. Even so, material misstatements were reported at all the metros, except Cape Town and Ekurhuleni.
That means that the audit outcomes may have been much worse if the local authorities were not given the opportunity to correct these misstatements during the auditing process.
The AG reported material findings relating to supply chain management at seven of the eight metros and three showed material non-compliance with human resource legislation. He identified financial risk indicators at half of the metros, namely Buffalo City, Nelson Mandela Bay, Mangaung and eThekwini, although they don’t seem to be material. Information technology controls were found to be inadequate in all eight metros, as was the case in the previous year.
The AG further indicated that leadership regarding key controls in all impact areas (financial, performance and compliance) deteriorated from the previous year in Tshwane, necessitating intervention. The same goes for leadership in performance in Nelson Mandela Bay and Ekurhuleni.
Economist Mike Schüssler says South Africans cannot afford the inefficacy of its municipalities anymore. He says metros are the economic hubs in the country and are supposed to drive economic growth. If one sees the questionable expenditure against the background of huge outstanding debtors and water and electricity losses it is however clear that they are not living up to expectations, he says.
The AG quoted National Treasury, stating debt owed to all municipalities at the end of FY 2012-13 stood at R86.9 billion. The National Energy Regulator earlier told Moneyweb that 18% of the electricity municipalities bought in FY2012-13 was lost due to technical losses related to maintenance and electricity theft. Johannesburg’s City Power reported 22% losses while losses in other metros were around 10%. Water losses are known to be a growing problem.
Problematic expenditure by metropolitan councils as reported by the AG:
Source: Consolidated general report on the audit outcomes of local government 2013-13