KZN councils show slight uptick, but AG Tsakani Maluleke red flags failing managers and hefty consultant bills

9 Jun 2023

An improvement in audit outcomes in KwaZulu-Natal municipalities in 2021/22 is an indication that leaders are heading the call to ‘institutionalise preventative controls and implement consequent management and accountability’, says the Auditor-General. Yet only three municipalities achieved clean audits: King Cetshwayo District Municipality, Okhahlamba and uMhlathuze local municipalities.

Overall, KwaZulu-Natal’s audit outcomes have improved slightly from the 2020/21 reporting period, but Auditor-General (AG) Tsakani Maluleke says councils should be more “robust and persuasive” in holding municipal managers accountable for failing to carry out their responsibilities.

Read in Daily Maverick: Local government litany of woe — municipal decay and its dire consequences for service delivery

In her 2021/22 report, Maluleke found nine municipalities in the province (Ugu District Municipality and the AbaQulusi, Dannhauser, eDumbe, Inkosi Langalibalele, Nquthu, Ray Nkonyeni, uMngeni, and uMshwathi local municipalities) had improved their audit opinions. Four municipalities (uMzinyathi and Harry Gwala district municipalities, and Msunduzi and Ulundi local municipalities) have regressed.

In KZN, three municipalities achieved clean audits: King Cetshwayo District Municipality, Okhahlamba and uMhlathuze local municipalities. Here, Okhahlamba Municipality leads the way, with eight consecutive clean audit opinions.

In the 2021 local government elections the ANC lost its 52% majority in the rural Okhahlamba Municipality, dipping to 29%. It has since managed to hold onto the council through a coalition with the African Peoples’ Movement and the National Freedom Party.

The ANC also lost its outright majority in uMhlathuze (Richards Bay). An IFP-led coalition has control of the council.

Read in Daily Maverick: EFF records famous victory over ANC in Free State as IFP turns tables on ruling party in KZN

In her report, Maluleke flagged nine municipalities in the province as being in a concerning financial state: Impendle, Mpofana, Msunduzi, Newcastle, Nkandla and Ulundi local municipalities, and Ugu, uMzinyathi and uThukela district municipalities.

The nine municipalities reported doubt about their ability to continue operating, with six having raised such challenges for at least the past four years.

Of the nine municipalities flagged by the AG, four are under administration. They are the ANC-led Msunduzi and Mpofana local municipalities, and uThukela and uMzinyathi district municipalities, which are IFP-led.

Msunduzi, Mpofana and uThukela have all remained under administration since the 2018/19 financial year, Daily Maverick reported.

Heavy reliance on consultants

When judged next to its provincial peers, KZN emerges as the biggest spender on consultants. Financial reporting consultants cost municipalities in the province R309-million in 2021/22. This is an increase of more than R100-million from the last financial year, when municipalities dished out R205.6-million on consultants.

Of the 54 municipalities in KZN, 48 relied on consultants to prepare and review their financial statements, “even though in most instances they had appointed officials to perform these functions”, said Maluleke.

“Despite municipalities spending R309-million on financial reporting consultants, this investment has not had the desired impact. At 25 municipalities (52%), we identified material misstatements in the areas where consultants were used,” she said.

The reasons for this included poor project management, inadequate record management and delays in appointing consultants.

Irregular expenditure

KZN’s municipalities amassed a total of R5.92-billion in irregular expenditure – 6% of the provincial budget. In 2020/21, irregular spending in the province stood at R3.4-billion.

In her report, the AG found that non-compliance with supply chain management legislation contributed to more than 90% of the province’s irregular expenditure.

“Although municipalities made some effort to investigate and deal with the irregular expenditure closing balance of R14.46-billion, their progress was slow and they managed to reduce the closing balance by only R2.64-billion,” said Maluleke.

Crumbling municipal infrastructure

According to the AG, most councils in the province did not fully achieve their planned service delivery targets for the year.

“Ageing infrastructure and a lack of maintenance made it difficult for municipalities to fulfil their service delivery commitments to the public,” said Maluleke. This contributed to the high water distribution losses of R3.42-billion (45.21% of all water that flowed through municipal infrastructure).

KZN has infrastructure assets worth R89.66-billion, but the AG found only 3.6% of its spending was on repairing and maintaining these assets.

“The crumbling municipal infrastructure has not only affected service delivery but has also increased the risk of harm to communities and the environment,” she said.

The AG found this was evident in Ugu District Municipality’s wastewater works, where the historical lack of maintenance resulted in the plants not operating and disposing untreated wastewater into rivers. Additionally, the water in Amajuba District Municipality failed to meet the standard for quality drinking water, and contained traces of E. coli, which posed potential health risks to residents.

Impact of flooding

The 2021/22 audit outcomes covered the period in which devastating floods caused havoc in the province, in April and May 2022. In response to the floods in KZN and the Eastern Cape, Cabinet declared a National State of Disaster.

On the back of mounting public concern that the funds allocated to deal with the disaster would be misappropriated, President Cyril Ramaphosa requested the AG’s office to conduct a real-time audit of the flood relief funds to ensure they were used as intended. The AG conducted a real-time audit of the flood response in iLembe, Ugu and Zululand district municipalities, KwaDukuza Local Municipality and eThekwini Metro, focusing on water supply, water-related infrastructure, sanitation and roads, and the provision of building materials to people whose homes were destroyed.

Maluleke released her report in August 2022, which painted a bleak picture of the government’s response to the disaster. Read here and here.

In her August 2022 report, the AG found eThekwini metro guilty of failing to prepare a comprehensive needs assessment to ensure the effective planning and delivery of water, which consequently led to water tankers failing to meet the needs of affected communities.

In her latest report, Maluleke said her office had followed up on the implementation of eThekwini Metro’s action plan to address her office’s findings on its water supply initiative and found “that slow progress has been made to implement our recommendations and we continued to identify similar deficiencies”.

She added: “Although Tongaat water treatment works in eThekwini Metro is operating again, it is still not producing the required amount of water because the bulk supply pipelines on which it relies were not assessed or repaired before operations were restored, despite having been visibly damaged.”

The challenges KZN councils face – particularly those relating to infrastructure and flood relief – call for greater intergovernmental coordination, said Maluleke. DM

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Heavy reliance on consultants

Irregular expenditure

Crumbling municipal infrastructure

Impact of flooding