South African Municipalities Lose Over R5 Billion to Material Irregularities, Auditor-General Alarms

In a stark revelation, South Africa's Auditor-General (AG) Tsakani Maluleke disclosed that a sample of the country's municipalities experienced material irregularities amounting to a staggering R5.2 billion loss, stemming from a lack of proper financial controls and slack in addressing financial mismanagement. Although this figure only represents a fraction of all municipalities, it paints a dire picture of the fiscal health of local governments and the urgent need for reforms.

The Public Audit Act of 2019 armed the Auditor-General with the powers to take action when financial losses go unaddressed by officials. Maluleke’s findings are based on their audit approach, which utilizes a scientifically determined subset of the municipalities to extrapolate the extent of financial mismanagement present. This loss is primarily linked to the non-delivery of paid goods and services and the impractical and inequitable use of consultants.

A particularly disturbing trend noted was the tendency for municipalities to hire outside consultants to perform the duties already assigned to in-house officials, resulting in unnecessary duplications of effort and cost. In 2021, the Auditor-General highlighted that despite having full-fledged finance departments, municipalities spent over R1 billion on consultants, with the financial divisions’ staff wage bill towering at R4.5 billion.

This reliance on consultants notwithstanding the fabric of existing skilled personnel has culminated in a grotesque financial redundancy where both external and internal personnel are remunerated for identical roles, yet there remains nothing to show for these expenditures.

However, Maluleke noted advancements in tracking and auditing material irregularities, with the AG's office expanding its focus from a mere four municipalities in 2019 to over 170 currently. The identified material irregularities have reached 268, with 194 related to transactions with material financial loss.

Historically, local government has been flagged by numerous state agencies, such as the Special Investigating Unit, the Hawks, and the National Prosecuting Authority, for procurement process violations, non-compliance, and susceptibility to corruption and fraud. This audit further substantiates the acute lapses in oversight and the necessity for tangible action.

The Standing Committee on Public Accounts has echoed similar concerns, advocating for stringent adherence to procurement procedures. Given that several municipalities are on the brink of collapse, the government has received recommendations to intervene and spearhead fundamental structural changes to arrest this distressing trend.

The recent briefing by the Auditor-General to the standing committee underscores a systemic issue that continues to compromise the effectiveness and accountability of local governance. Maluleke’s persistence in bringing these issues to light reflects a commitment to preventing further loss and promoting the proper use of public funds.

As the Auditor-General concludes, there needs to be a comprehensive shift in attitudes and practices within municipalities towards reliance on consultants and overall financial governance to stem the tide of these losses. The future of South Africa's local government fiscal responsibility hangs in the balance as the country awaits actionable responses to these findings.