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Auditor General of South Africa Tsakani Maluleke in conversation with GIBS Founding Dean, Professor Nick Binedell

The Auditor General of South Africa Tsakani Maluleke believes the dire audit outcomes of some local municipalities correlates with the service delivery challenges the citizens continue to experience.  These have in some instances led to service delivery protests in some parts of the country. 

“Where accountability fails and limited public resources are financially mismanaged, service delivery is also likely to fail,” she told Gordon Institute of Business Science (GIBS) Founding Dean Professor Nick Binedell during an online Flash Forum. 

“I do believe we have a crisis in local government if you look at the financial health problems and service delivery issues in different parts of the country. The ability of all municipalities to respond to the growing, complex, and competing needs and wants of citizens is diminishing, especially in light of an economy that is under pressure.”

The deteriorating state of local government  
In her consolidated general report on the local government audit outcomes for the 2019-20 financial year and Covid-19 municipal expenditure, Maluleke highlighted the deteriorating state of local government. 
The report found that the financial position of just over a quarter of the 257 municipalities in South Africa is so dire that there is significant doubt whether they will be able to continue meeting their obligations in the near future.

These municipalities are exhibiting indicators of financial strain, including low debt recovery, inability to pay creditors on time, and recording operating deficits on their income statements. The number of clean municipal audits declined from 33 to 27, while fruitless and wasteful expenditure amounted to R3,47bn, a significant part of which was the loss of billions of rand because of interest and penalties.
Maluleke said only 28% of municipalities audited submitted quality, credible financial statements at the beginning of the process: “This indicates that don’t have the key disciplines in place and calls into question the nature of decision making throughout the year.”

Of the R5bn used for financial reporting during the period, R1bn went to external consultants to prepare financial statements for the audit. Maluleke explained local governments were spending “significant resources to help with the basics, such as the reconciliation of bank accounts.” 

Another example of financial management problems the Auditor General’s office found was the lack of documentation: “Contracts worth R1,4bn couldn’t be audited because those records were simply not made available to us. That demonstrates some glaring concerns about the commitment to accountability, transparency, and indeed the rule of law.” 

“At most of these municipalities we observed leadership instability, both at a political and administrative level, poor council oversight, significant financial health problems, a lack of consequences and ineffective interventions for provincial government,” she continued. In addition, there are “worrying trends that there is still a lack of progressive and sustainable improvement which are required to prevent accountability failures.” 

Change and upcoming local government elections
Maluleke said the report was “a clarion call for ethical and accountable leadership to drive the required change that is necessary to bring about improved local government.” While there had been somewhat of an improvement in the responsiveness of law enforcement towards corruption and malfeasance, which included legal repercussions following the audit of Covid relief funds, “the only way we are going to safeguard our resources is to push back on a culture that tends to tolerate wrongdoing.” 
 
Maluleke said there is a need to improve the managerial, technical, and administrative capacity of municipalities.  “Without political and administrative leadership stability, interventions will not bear fruit.” 

She said the upcoming local government elections provided an opportunity to appoint capable, qualified, and committed public servants that are fit for purpose and want to change people’s lives. “We must learn from what has gone before to build a local government administration that is accountable, responsive, ethical, and responsible. If we manage to do this, then the prospects are ever encouraging.” 

“We have another chance with these elections coming up to get this thing right. Let’s put in place the leadership that’s going to do what is required and drive the right changes so that we can improve a lot of local government. A leadership that is willing to tackle fraud, corruption, malfeasance and introduce good governance and operational efficiencies. Change will be realised if municipal leaders are supported by their provincial leaders.”

Maluleke said the recent civil unrest in KwaZulu Natal and Gauteng was a “wake-up call. We have been talking about inequality, poverty, and unemployment for years as a country, but we have done little to genuinely address it. We have been very eloquent about agreeing with one another, but woefully inadequate about actually dealing with the issues.” 
 
The riots also “brought into sharp focus the urgency with which we need to deal with inequality and the notion that if we continue to neglect it, we are really going to face up to the consequences of a failed democracy, and none of us want that.” 

In her concluding remarks, Maluleke said  “If we want to improve the living conditions of the people of this country, we have to address how local government functions, and this starts with ensuring that local government is led and run by people that embrace the key values of capability, professional ethics, accountability, and transparency. We need people who stay the course and people that are supported by citizens that take an active interest in maintaining the integrity of public institutions.” 



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