Why we should be concerned about the R20 billion additional funding to municipalities

Municipalities are to get R20 billion in additional funding to ride them through the Covid-19 crisis, but given their track record of irregular spending, residents and rates payers have a right to be concerned that this money will be properly spent.


The cause for concern comes from the Auditor-General’s (AG) 2019 Municipal Report which suggests 60% of revenue reflected on the books of municipalities will never be paid. Even before the Covid-19 crisis, there was an alarming pattern of individuals and businesses showing signs of a diminishing ability to pay for services, or simply refusing to pay.

This has devastated revenue in many municipalities, reducing their ability to meet service delivery expectations. The Department of Cooperative Governance is about to launch a National Responsible Citizenry Campaign across all 257 municipalities in the hopes of restoring a culture of payment.

But such a campaign sinks or swims on the economic fortunes of households and businesses. We know from the July 2020 TransUnion Consumer Financial Hardship Study that 80% of those surveyed reported a negative impact from the Covid-19 crisis. Shockingly, 17% of “impacted consumers” reported losing their jobs compared to 10% in the previous survey.

South Africans are in dire financial straits. This does not augur well for any campaign to restore a culture of payment in municipalities. The culture of non-payment was already well entrenched before Covid-19, but will have severely deepened In the last three months of the lockdown.

Quite in addition to this, the AG report points to a shocking culture of financial mismanagement and corruption in municipalities. Only 8% of the 257 municipalities received clean audits in the 2017-8 financial year, and half of them had financial statements deemed “quality”. Irregular expenditure totalled R32 billion and the likely financial loss from material irregularities came to R24 billion.

South Africans need to be especially vigilant when an additional R20 billion is being directed to already dysfunctional municipalities.

The Parliamentary Monitoring Group (PMG) reports the growing concerns of opposition parties relating to how this R20 billion will be distributed and what mechanisms will be put in place to monitor this spending.

There are valid concerns that municipalities will become semi-permanent wards of National Treasury, which means taxpayers will ultimately be responsible for their financial survival. The municipal funding models are shattered and an entirely new model will have to be found over the longer term.

Rate payers are becoming more active and engaged in local governance, and this is likely to be the most powerful force for establishing a culture of accountability and service delivery at local government level, says DearSA programme director, Rob Hutchinson.

“Municipal governance has been allowed to sink to these appalling levels because there was no proper oversight. This is changing, but it needs to happen far quicker. We cannot end up with a completely broken local government sector that relies more and more on bailouts from central government. We will be keeping a close eye on this R20 billion in additional funding for municipalities to see that it is not squandered through theft, corruption and maladministration.”

One of the areas of efficiency being explored by the DCoG is improved supply chain management – for example, “pool financing” for municipalities that have identified projects on municipal boundaries such as the Lanseria Airport project which lies on the border of the City of Johannesburg and the City of Tshwane.

Municipalities will be able to apply for licences to distribute electricity as a way of raising additional revenue. Programmes are being conceived by Treasury and SA Local Government Association (SALGA) to improve the local government fiscal framework. Municipalities will be required to report weekly to National Treasury for money allocated through the Covid-19 relief scheme.

The DCoG will introduce an Intergovernmental Monitoring, Support and Intervention Bill to provide further oversight of municipal fiscal management and spending.

The AG will continue to audit these entities and now has more robust powers to bring municipal thieves to book.

But we are still not satisfied that this will solve the problems mentioned above. For this reason, DearSA is redoubling its efforts to bring accountability to the local government sector by running various participative democracy campaigns at municipal level.

If there is one thing that terrifies errant municipal officers, it is the voice of the public. DearSA is providing that voice.