SAFTU shocked by Auditor-General’s report on municipalities

24 May 2018

The South African Federation of Trade Unions is shocked by the report to Parliament by Auditor-General (AG), Kimi Makwetu, which revealed that irregular expenditure by municipalities in the 2016/17 financial year increased by 75% over just one year, to reach a massive R28.376bn. He reported that:

- Out of the 257 municipalities and 21 municipal entities only 33 got a clean audit in the financial year to 30 June 2017. 

- Only 22% could provide financial statements without any material misstatements.

- Almost 62% of the performance reports submitted by municipalities had material flaws and were not credible enough for the council or the public to use.

- 61% of municipalities failed to investigate unauthorised, irregular or fruitless expenditure incurred in 2015-16, a regression on the 52% figure reported in the previous period.

- Not a single municipality in North West, Limpopo or the Free State received a clean audit.

Five years ago, in his 2013 report for the 2011/2012, the AG complained that there had been no compliance with his constant and insistent advice regarding administrative lapses. Now, five years later he says the patterns have not changed. In the past year 45 municipalities got worse and just 16 improved.

These problems are made even worse by rising debt, with 31% of municipalities disclosing a deficit of R5.6bn, due to the inability to collect revenue from consumers and debt owed by municipalities to their creditors.

One of the most alarming findings in the report is that not only were municipalities failing to take action on the auditor-general’s findings, but the environment in which auditing teams had to work had become steadily more hostile with increased threats to staff.

This all adds up to a crisis of colossal proportions, and it is the workers and he poor who suffer most as a result. It is no coincidence that this financial crisis was taking place at a time when service delivery protests have been increasing. 

"April was a particularly protest-prone month in North West‚ Northern Cape and Free State municipalities," says Municipal IQ economist Karen Heese, “often affecting roads and basic services. Of great concern is that 94% of the service delivery protests we have recorded this year [2018] have been violent – a significant uptick when compared to 76% since 2004."

This was clearly linked to the theft and waste of billions of rands which were supposed to have paid for basic service to the people. That missing R28.376bn could have built hundreds of houses, renovated slum schools, upgraded dysfunctional hospitals and provided electricity, running water and tarred road to impoverished rural communities.

There is also a direct link between this waste and looting of money and the soaring rate of unemployment. This money should not only have improved the lives of people in the poorest communities but paid for hundreds of new jobs for those working to provide these services. 

Undoubtedly much of this “irregular expenditure" has not just been wasted or mis-spent  but has ended up in the pockets of corrupt politicians, officials and business people. 

Unsurprisingly the AG’s report shows that North West is the worst offender and the scene of the most widespread and angry protests. Not a single one of the province’s  22 municipalities received a clean audit. They racked up more than R4-billion in irregular expenditure, and the province also underspent on crucial development projects by almost R200-million..

"The fact that not a single municipality was able to achieve a clean audit outcome,” says the AG, “again highlights the lack of accountability by municipal management — and other key role players in the province who are responsible for monitoring and assisting local government”.

That shocking figure alone shows why SAFTU welcomes the “early retirement” of Premier Supra Mahumapelo, who faces multiple allegations of corruption. This is also the province which saw the murder of whistle blowers like Moss Phakoe, who paid with his life for threatening expose corruption in the province.

Belatedly Parliament is debating the Public Audit Amendment Bill, which will give greater power to the AG’s office, including the right to refer institutions and individuals to the Hawks and SAPS. It will also allow them to order accounting officers to pay back money that has been lost as a result of their mismanagement.

SAFTU welcomes this bill but insists that it must be immediately and thorougly implemented if we are to start to turn the tide and cut shocking levels of theft and waste of the country’s resources. This is the Bill that must be rushed through instead of the Bills that will emasculate the working class and entrench poverty amongst workers. These draconian labour Bills will be passed into law on the 30 May 2018.

There must be a far more urgent drive to root out all corruption and prosecute all those, like Mahumapelo, against whom there seems to be evidence of looting. It must not only be those in the public service who are prosecuted but also those in the private sector who have enriched themselves through bribery and tender manipulation.

Issued by Patrick Craven, SAFTU Acting Spokesperson, 24 May 2018