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Financial gauge: Auditor-General puts spotlight on state of South Africa's eight metros

Financial gauge: Auditor-General puts spotlight on state of South Africa's eight metros
Suné Payne
By Suné Payne
28 Jun 2022
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Ekurhuleni was the only one of South Africa’s eight metros to receive a clean audit from the Auditor-General, raising serious concerns over metro spending controls and infrastructure.

Lack of systems, water problems and security upgrades were identified as some of the biggest problems at metropolitan municipalities in the latest report of the 2020-2021 municipal audit outcomes by the Auditor-General (AG).  

Daily Maverick has been unpacking the AG’s report. Find some of the articles here: 




According to the AG, metros serve the largest segment of the population and account for more than half of the local government expenditure budget. 

 


Gauteng  


Of the eight metro municipalities, Ekurhuleni was the only one to receive a clean audit by the AG’s office. This was the municipality’s second straight clean audit, with no material findings on its performance plans or reporting. The AG said indicators related to water and sanitation showed that the metro was “responsive to concerns raised by citizens”. According to the AG’s report, the metro over-achieved on its target to resolve 85% of water and sanitation complaints within 48 hours. Ekurhuleni saw 90% of water-related complaints and 87% of sanitation-related complaints resolved within 48 hours, said the AG. 

The City of Tshwane and the City of Johannesburg received unqualified audit opinions with findings.  

The City of Johannesburg (COJ) was flagged for having projects that were poorly managed. The AG said the metro spent R173-million on an SAP upgrade, which was delayed significantly due to “the imminent implementation of the Municipal Standard Chart of Accounts and the metro, therefore, did not derive the intended value from the project.” 

On maintenance, the AG said the COJ “acknowledged that most of its infrastructure assets have passed their useful life and cannot be salvaged through repairs and maintenance”. 

In its breakdown, the AG said a material irregularity was issued to the City of Tshwane based on “harm to the public due to the poor quality of water supplied to Hammanskraal residents”. The AG also pointed to the metro’s security weaknesses — in 2019 it was hacked and defrauded of R53-million meant for pension fund contributions. 

“We notified the municipal manager of this material irregularity — investigations and prosecution are ongoing, with R23.1-million having been recovered to date,” said the AG’s office. 

Eastern Cape 


Buffalo City in the Eastern Cape received a qualified audit finding. The AG reported that the metro did not bill a “number” of customers for water services provided during 2019-2020, “resulting in a likely financial loss of R9.6-million”. According to the AG: “This was caused by a number of control deficiencies, including a lack of integrated processes and systems between the municipality’s directorates as well as delays in updating systems and registers that linked water meters per property.” These issues were addressed and billing started from 2020-2021. The municipal manager launched an investigation to identify the responsible officials. 

Also in the Eastern Cape, the Nelson Mandela Bay metro received a qualified audit. According to the AG, one issue was irregular expenditure worth R1.4-billion, mainly due to “awarding contracts based on deviations that were not justifiable”. In addition, the metro did not investigate “most of the prior year’s irregular expenditure, ending with a closing balance of R17.7-billion”. Nelson Mandela Bay’s municipal account committee was also flagged for last dealing with irregular expenditure in November 2019.  

KwaZulu-Natal 


The province’s only metro, eThekwini, received an audit opinion of “unqualified with findings”. The AG said the municipality must strengthen its monitoring and review of procurement and consequence management to improve audit outcomes. 

The AG pointed out material irregularities related to procurement: “eThekwini procured face masks at prices higher than those recommended by the National Treasury… this procurement at excessive prices resulted in financial losses for the municipality.” According to the AG, the metro was investigating this matter.  

Free State


Mangaung, the province’s only metro, received an “unqualified with findings” audit opinion. According to the AG’s report, the National Treasury withheld conditional grant funding of R429.02-million due to “underspending that resulted from delays in completing grant-funded projects”. In turn, this placed further strain on the metro’s financial health and negative impact on service delivery. 

The AG said the metro “spent less than 2% of its infrastructure budget on repairs and maintenance, resulting in infrastructures such as roads and water networks further deteriorating”. Service delivery protests increased as residents grew increasingly dissatisfied with pothole-riddled roads, having to go for days without water, and refuse sometimes not being collected for weeks.

Western Cape


The City of Cape Town received an “unqualified with findings” audit opinion. In the AG’s notes on the city, the AG said it had regressed from a clean audit outcome to a financially unqualified opinion — with findings on compliance legislation relating to supply chain management and the prevention of irregular expenditure. 

The AG said: “The metro spent R2.68-billion on repairing and maintaining its assets (valued at R53-billion) ... at 5% of the value of the assets, the spending was below the norm of 8%... This resulted in the metro not meeting its spending performance target on repairing and maintaining by 95%, which will affect the long-term service delivery potential of these assets.” DM

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