Our municipalities are in a state of disaster; we have one last chance to fix them

“We have been looted since the days of Bophuthatswana, and every five years a new mafia comes to loot us; we suffer from incompetence, corruption, and politics – it’s bad,” says a colleague about her experience in the Mahikeng municipality in North West.

The Free State and North West share the “honour” of not producing a single clean audit in the 2020/21 Auditor-General (AG) report. 

The worst is the Free State, which has consistently failed to produce a clean audit in five years.

Despite the fact that the AG religiously points out these glaring anomalies, municipalities have regressed over the past five years. 

Municipalities heard – but simply did not listen. And this is our national shame. 

The audit findings, however, come as no surprise, drawing a curtain on the municipal financial and performance reporting of the fourth administration. 

To say that municipalities are in a state of perpetual depression would be an understatement.

But let us get to the genesis of the AG’s report. For the sake of good governance, municipalities are audited annually by the Office of the AG. At the completion of such an audit, opinion is expressed. 

An unqualified opinion with no findings (clean audit) means the municipality has produced quality financial statements free from material misstatements, and has produced quality performance reports that measure and report on performance in a manner that is useful and reliable and complied with key legislation. Only 16% achieved this.

An unqualified opinion with findings means the municipality was able to produce quality financial statements but struggled to produce quality performance reports and/or to comply with all key legislation. Only 40% achieved this.

A qualified opinion with findings means the municipality’s financial statements contained material misstatements that were not corrected before the financial statements were published. The municipality’s performance report and/or compliance with key legislation is also not adhered to. This is true for 30% of municipalities.

Financial statements with an adverse opinion with findings mean the AG disagreed with virtually all the amounts and disclosures in the financial statements. This is true for 2%.

A disclaimed opinion with findings means the municipality could not provide evidence for most of the amounts and disclosures in the financial statements, resulting in the AG being unable to conclude or express an opinion on the credibility of the financial statements. This is true for 10%.

And 4% simply did not bother to submit documentation for scrutiny. 

So, the audit opinion does count and gives an indication of the state of financial governance.

The March 2022 Municipal Skills and Capacity Assessment Study is yet another report confirming that our problems in local government stem from a number of known problems. 

The number one problem is people and behaviour.

But it is the brazen use of consultants that is an indictment of our failing skills development initiatives. 

A staggering R1.26-billion was spent on consultants in one year. 

And only 7% of municipalities used consultants to bridge a vacancy gap, whereas 62% appointed consultants to provide for the skills deficit in finance departments.

The inability of municipalities to master credible financial reporting means that they continue to appoint consultants, without the vital element of skills transfer. 

In total, 79% of municipalities reappointed consultants used in the previous year. So, instead of using the enabling skills development legislation (in operation since 1998), managers simply take the easy route and employ consultants instead of growing their own timber.

To top it all, most of the consultants were not even used to solve complex accounting matters, but were rather contracted for basics such as the recording and valuation of assets, which are the fundamentals of good asset management. 

Added to that, the expected benefits of using consultants to enable quality financial statements were not always apparent, according to the AG.

So, despite the mandatory and discretionary grant system from the Seta, a ministry dedicated to local government, and the South African Local Government Association (Salga) programmes, municipalities continue to decline at a rapid pace.  

So, what must be done?

The new Municipal Staff Regulations come into effect on 1 July 2022 and are the perfect restart for local government. 

Not only do they clarify the recruitment and selection process, but also set the competency framework for municipal staff. They further clarify the skills development and performance management protocols that place managers at the centre of human resource development.

But the implementation of the regulations must be subjected to and policed through an audit process akin to that of the AG. 

Using evidence-based HR auditing will go a long way to ensure that the credibility and integrity of local government is restored.

Municipalities simply cannot be trusted to implement the regulations on their own. 

They must be supported through evidence-based processes to ensure success. And this is the challenge for the fifth administration – for politicians and administrators alike to behave themselves into a new implementation culture of excellence.

The institutions of higher learning, together with the AG, Local Government Sector Education and Training Authority, Salga, NSG and Cogta, must form a war room. It is that big a national crisis, tantamount to a state of disaster. 

There simply has to be better coordination and collaboration, as envisaged in the District Development Model.

But for goodness sake, let us get it right, and lead – not loot. 

Not through our fancy words and speeches, but through our deeds. We must heed the advice of Peter Drucker, who said the best way to predict the future is to design it. And may I add, to find the courage and patience to implement and see our collective local government dream to fruition.

This may very well be the last chance for municipalities to fix a broken system. To restore hope and the confidence of South Africans. To stop the waste. To create pathways out of poverty, unemployment and inequality.

Decisive action is needed. It can be done. It must be done. DM