Auditor-General's damning findings reveal Nelson Mandela Bay's struggles with waste and mismanagement

5 Feb 2025

In May 2024 the former Nelson Mandela Bay mayor Gary van Niekerk claimed that Treasury officials ‘applauded’ the work done by the coalition government he led, but the Auditor-General’s report for that financial year has found that the City had regressed in its audit outcomes and revealed chaos in the key metro in the Eastern Cape. The council did finally appoint a new chief financial officer last week, but the City still faces the spectre of losing even more grant funding.

The Auditor-General has delivered a stern and damning report on how Nelson Mandela Bay has been run as the metro regressed in its audit findings to a qualified audit.

In the 2022/2023 financial year the metro received its first unqualified opinion in 12 years. For the 2023/2024 financial year it had regressed to a qualified audit. This despite claims by former mayor Gary van Niekerk, now the deputy mayor, that Treasury officials had “applauded them” for their work.

Read more: Nelson Mandela Bay Metro asks Eastern Cape government to send an acting city manager

Van Niekerk is currently on suspension after he was charged with fraud relating to the use of council money to pay for private legal services.

Read more: Nelson Mandela Bay councillors suspend Deputy Mayor Gary van Niekerk pending criminal trial

A motion to remove Van Niekerk from his position failed in council on Thursday, 30 January 2025.

The current executive mayor, Babalwa Lobishe, said the report from the Auditor-General was demoralising but that they remained committed to turning the page. The metro had been operating without a permanent chief financial officer but council had appointed Jackson Mgcelwane as the new incumbent on Thursday.

Issues highlighted by Auditor-General senior manager Thembela Mseleni included:

Vacant positions are not being filled and personnel in some departments have not received all the training that they should have.

The metro’s wastewater treatment plants do not have valid licences, including the large Fishwater Flats facility where a disastrous spill in December closed down New Brighton Beach.

One of the landfills at iBhayi is in contravention of its permit conditions and the Environmental Act, and less than 10% of the site has been rehabilitated, while the rest is illegally occupied by an informal settlement.

“We worry about this. This was not a site for residential after rehabilitation,” Mseleni said.

He said 200 housing units in Motherwell had been handed to beneficiaries without electricity, and there were quality issues with the building and poor specifications.

He also highlighted how the municipality took two years after the closing date to award a roads contract. Electricity work done at the KwaFord and Matomela substations was also not done as per the guidelines of the engineering council, and as the projects exceeded the original contract amount it was marked as irregular expenditure, Mseleni added.

He said that unauthorised expenditure for the year stood at R1.45-billion “which is due to poor planning, unknown events and lack of budget”.

He also asked for increased vigilance for deviations from supply chain management procedures, saying that R22-billion in irregular expenditure was due to this. The Special Investigating Unit is currently investigating “deviation” contracts in the metro’s electricity department.

Mseleni said the metro also spent R705-million in fruitless and wasteful expenditure, including a fine for polluting the Swartkops River and R17-million after botched suspension and disciplinary action against officials.

He also flagged two water projects that were not carried out, and queried why the investigations into these were “very slow”.

“We need to know who is responsible to fast-track this investigation,” Mseleni said.

Good Councillor Lawrence Troon recounted how the city paid R230,000 to fight a case after a person was awarded R200,000 in damages.

“There is something going on in this municipality that is not right — it has festered there in your corporate services. You find that officials who sit on interviewing panels will deliberately appoint their friends who do not qualify for the job. A person who does qualify will appeal — the Bargaining Council will find in their favour — but then the person who was wrongfully appointed by the panel, then the officials appeal again." Troon claimed he brought such a case to the chief operating officer last week. "The officials know they have endless funds to fight the case for their friends.”

Democratic Alliance councillor Brendon Pegram described the audit outcomes as “exceptionally disappointing”. He highlighted further findings by the Auditor-General that material electricity losses in the metro now stood at R1.2-billion.

Pegram said they had received a “copy and paste” turnaround plan for the electricity department for the past few years. He said electricity losses for the first months of the current financial year were already at 30%.

“If this continues the department will bring the metro to its knees.”

Read more: NMB mayor ‘was warned about precarious state of power pylons’ months before they collapsed

Water losses, Pegram pointed out, stood at 55.8 million kilolitres.

“What a disaster and a slap in the face to our residents,” he said. He further highlighted that overtime payments, notably for these two departments where the biggest losses were recorded, now stood at R170.15-million.

The metro’s rate collection rate was only 74% at present.

“We used to have a clean audit,” Lance Grootboom from the ACDP said.

Mseleni said it was important to talk more about accountability.

“There has been no improvement in compliance. There are material problems in all areas. The recommendations have been disregarded, resulting in a weak control,” he said.

“We (the Auditor-General) are not the only ones who can shift the culture of the public institutions,” he said. “That is why we are encouraging the Municipal Public Accounts Committee, council, mayor and senior officials, that they need to ensure that they play their role. We encourage them to move to an unqualified audit,” he said.

He added that the quality of financial reporting in the metro was poor, and said the auditors had picked up several misstatements.

One issue highlighted by Mseleni was that water debts had been written off, as per a council decision that this would be done for properties with a value of less than R130,000.

“But when we looked to audit we couldn’t find evidence to confirm that it was done — that everyone who was written off had a property under R130,000,” he said.

After the council meeting Pegram said the metro was on track to repeat the mistakes of the 2023/2024 financial year, which saw a record loss of R580-million in conditional grant funding.

The metro had only spent 21.17% of its total capital budget halfway through the financial year.

Read more: Bad governance: Finance Minister orders withholding of R781m in government grants to Nelson Mandela Bay

Conditional grant funding is earmarked for infrastructure development, including road construction, electricity, water, and sanitation, as well as RDP housing.

“The consequences of failing to utilise these funds will not only cause the metro to miss out on crucial infrastructure development, but it will also deprive the local economy of direct investment, which could have created jobs,” Pegram added.

Lobishe said a decision by the council to offer a settlement package to City Manager Noxolo Nqwazi, who was currently on trial for tender fraud and corruption, was deferred for seven days because the National Treasury had not responded to their request to approve this decision. She said they did not want to waste taxpayers’ money. DM

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