Auditor-General sounds alarm on governance crisis in SA’s biggest cities, gives Cape Town the thumbs up

Only 16% of South Africa’s municipalities can be trusted to spend public funds effectively — and they account for just 19% of the municipal expenditure budget, says Auditor-General (AG) Tsakani Maluleke.

“The good news is that we are back to 41 clean audits, which is where we started back in 2020-21, so we’re no longer at the 34 that I talked about last year,” Maluleke told MPs in Parliament.

“However, that makes up 16% of the municipalities across the country. That tells you that only 19% of the municipal expenditure budget is being spent by municipalities that will predictably give you the outcomes you hope for, in that they have the disciplines and governance arrangements for you to trust that whatever money you send there will be spent in the way that you expect,” she continued.

Maluleke revealed the dire state of local councils in her 220-page report on the 2023-24 local government audit outcomes, tabled to Parliament’s Cooperative Governance and Traditional Affairs (Cogta) committee on Wednesday.

Read more: Money management is critical if dysfunctional local government is to be fixed

In the lead-up to the 2026 local government elections, the state of South African municipalities is shocking: “While 59 municipalities have improved their audit outcomes since 2020-21 (the last administration), 40 have regressed,” according to Maluleke.

“The messages in the last three general reports of the Auditor-General of South Africa (AGSA) have been aimed at the local government administration that took office in 2021 — the mayors, speakers and council members who were elected to represent their communities. We called on them to work with urgency to overhaul a local government characterised by insufficient accountability, failing service delivery, poor financial management and governance, weak institutional capability and widespread instability.

“Despite the commitments made in response to these calls, action has been too slow. Based on the overall audit outcomes in 2023-24, the results from the detailed work that we performed at metropolitan municipalities and local municipalities with repeated disclaimer audit opinions, we can only conclude that little has changed and that local government continues to be in a dire state,” she said.

  MFMA Report 2023-24 by victoria on Scribd

The number of municipalities with disclaimed audit opinions (the worst audit opinion) has decreased from 15 to 14. This is down from 28 in 2020-21, following the local government elections.

“The good news is that the disclaimers are continuing to [decrease]. That is credit to the provincial leadership in most of the provinces that have taken it upon themselves to support new municipalities to come out of disclaimer,” said Maluleke.

“We had 28 disclaimers [in 2020-21], we’re now sitting at 14. It’s still 14 too many.”

She said disclaimer audit opinions were “undesirable and intolerable”, particularly when they related to an individual or an institution that was looking after public funds.

Read more: ‘Time to pay up,’ Cogta Minister Hlabisa tells municipalities as government reviews funding models

Metros deteriorate 

In 2023-24, metros and their municipal entities were responsible for providing services to 8.9 million households (46% of households in SA) and managed 57% of the estimated local government expenditure budget, according to the AG report.

With big budgets and more capabilities, one would expect South Africa’s metros to have positive audit opinions. But, Maluleke said, “the overall audit outcomes of metros have continued to regress since 2020-21”.

“The metros, in our view, need particular, urgent attention if we are to get them to become the centres of economic growth and the centres that will make the lives of South Africans better. Right now, it would appear that we don’t yet have that.”

Read more: Wanted: A new government for Johannesburg’s great people

The City of Cape Town was the only metropolitan municipality to receive a clean audit in 2023-24, while the City of Johannesburg, eThekwini and Ekurhuleni received unqualified audits with findings.

Buffalo City, Tshwane, Mangaung and Nelson Mandela Bay all received qualified audit opinions with findings.

“The continued weakening of these metros over time has led to a situation where their financial health has deteriorated — many of them continue to be downgraded, three of them just this year,” she said, adding that it had also led to a situation where their infrastructure projects were not well-managed. Maluleke singled out Tshwane and Johannesburg for not budgeting adequately for the maintenance of their assets.

“The weakening of these institutions is something that we need to arrest — courageously, boldly and urgently so.”

Maluleke questioned whether the leadership of these metros included “the type of people that are equal to the task”.

Unfunded budgets 

The AG told MPs that the “culture of approving unfunded budgets remains a problem”.

In the 2023-34 financial year, she said, 113 municipalities (44%) approved unfunded budgets. Of the 113 municipalities, 86 had approved unfunded budgets for the past three years.

“This [is] despite the fact that the provincial treasury would’ve reviewed the budget and given advice, or the National Treasury for metros would’ve given advice. Municipalities continue to approve unfunded budgets.

“It’s become a culture,” she said.

Maluleke said that when these unfunded budgets were approved, her office still saw unauthorised expenditure.

Read more: Auditor-General reveals dismal state of government in Eastern Cape ahead of Ramaphosa visit

According to her report, the biggest contributors to unauthorised expenditure in 2023-24 were the City of Johannesburg (R2.76-billion), City of Tshwane (R2.15-billion) and Nelson Mandela Bay (R1.44-billion)

Accountability ecosystem 

“Every single public institution doesn’t operate as an island,” Maluleke told MPs.

She said that “beyond the boundaries” of councils, there were responsibilities that lay with the legislature and administration at provincial level.

“When we look at the governance arrangement within the country, we are convinced that if every single player in this ecosystem of accountability did their part well and consistently so, and if every single player was seized with ensuring that they collaborate and cooperate properly, we would have very few governance problems — unlike the situation right now,” she said.

It was up to the provincial leadership, including the provincial treasury, Cogta and premiers, “to set the tone around what is tolerated”.

Read more: Five critical steps to reform local government and save our collapsing municipalities

That being said, the role of mayors cannot be understated, according to Maluleke.

“The role of the mayor and the speaker are very important. When mayors do their part, things run well, and when they fail to do their part, things do not run so well.” DM