Uphill battle: Only two municipalities in the Eastern Cape achieved clean audits. This is despite millions being spent on consultants, employed to improve finances and other problems. (Delwyn Verasamy)
Despite spending more on external services to plug gaps left by mismanagement and a shortage of skilled workers, data shows that municipalities are underperforming and underspending their budgets. Sabelo Skiti and the Mail & Guardian Data Desk sift through the billions lost
After spending more than R3.4-billion on consultants to close critical skills and capacity gaps, South African municipalities have little to show for it. Instead, they have underspent on their budgets by more than R44-billion.
This is happening as Finance Minister Tito Mboweni averted what looked to be a standoff with the South African Local Government Association (Salga) over a raft of municipal austerity measures, which include limiting the use of consultants.
The Mail & Guardian analysed the consultancy spend of 23 of the biggest local and metropolitan municipalities. The data shows that the biggest spender on consultants and outsourced work was the eThekwini municipality, followed by Nelson Mandela Bay and then the City of Cape Town, spending R2.2-billion, R738-million and R224-million respectively.
uMsunduzi (which includes Pietermaritzburg, KwaZulu-Natal), Mahikeng (North West) and Polokwane (Limpopo) local municipalities spent close to R20-million in the 2017-2018 financial year on consultants.
Although the expenditure on consultants is on the rise, the auditor general, Kimi Makwetu, noted that consultants have been ineffective and this can be seen through the M&G’s analysis of the under-expenditure in many municipal budgets.
According to data provided by the treasury, a total of R44.2-billion was underspent by all municipalities at the end of last year’s fourth quarter. Underspending was the most prevalent in the North West at 43% (R9.6-billion), the Free State at 26.9% (R5.4-billion) and Mpumalanga at 26.2% (R5.5-billion).
William Gumede, an associate professor at the School of Governance at the University of the Witwatersrand who has been studying the auditor general reports for the past 10 years, says there is a clear trend.
“The more patronage there is, the more consultants are used,” he says.
He found that in places where consultants have been used, the problem they’re tasked to fix shows no improvement.
“The problem with consultants is that they don’t really fix the problem. It’s kind of like applying a Band-Aid to the problem. You don’t change the behaviour or change the issue. You have to change the people and the system — enforce compliance.”
Makwetu’s findings pointed to:
- Auditee ineffectiveness in 66 municipalities;
- Poor project management in 31 municipalities;
- Twenty-two cases of non-delivery by the consultants;
- Lack of records and documents in 19 instances; and
- Consultants being appointed too late in 15 cases.
In 43 cases where consultants were appointed, proper procurement processes were not followed, resulting in R181-million of irregular expenditure.
Data, contained in the auditor general’s latest consolidated general outcomes on municipal finances, reveals that, despite spending nearly R1-billion on consultants to help them prepare their financial year-end reports, 66% of the 197 municipalities’ reports contained material misstatements in areas where the consultants did the work.
Of the municipalities that used consultants to compile their financials, 104 recorded qualified, adverse and disclaimer outcomes, meaning that in 32 instances the auditor general could find no evidence or documents to make an audit finding.
Limpopo, one of three provinces where no municipality achieved a clean audit (the others being the North West and Mpumalanga), had the highest expenditure on consultants at R177-million. This was followed by the Eastern Cape (R166-million), Mpumalanga (R134-million) and the North West (R124-million).
The Eastern Cape had just two municipalities that achieved a clean audit.
Speaking specifically about Limpopo when releasing his report on Wednesday, Makwetu said leadership in municipalities should play a close oversight role on expenditure and on consultants.
“One of the observations we’ve made is that there are a couple of municipalities there that have limited technical knowledge in so far as the expected role of the CFO [chief financial officer] is concerned, and they go out and seek the support of external service providers.”
He added: “We think that there is something to be said about the role of leadership in monitoring that type of expenditure because there are people who are in roles but do not have the adequate training and competence to carry out their responsibilities.”
Makwetu’s report showed an overall decline in the audit results of 257 municipalities and 21 municipal entities audited.
The number of municipalities that achieved a clean audit declined from 33 in the 2016-2017 financial year to 18 in the period under his review.
Although irregular expenditure declined from R29.7-billion to R25.2-billion, a clearly frustrated Makwetu highlighted the dearth of accountability and consequence management as concerning, saying: “Sufficient steps were also not taken to recover, write-off, approve or condone unauthorised, irregular and fruitless and wasteful expenditure as required by legislation.
“As a result, the year-end balance of irregular expenditure that had accumulated over many years and had not been dealt with totalled R71.1-billion, while that of unauthorised expenditure was R46.2-billion and that of fruitless and wasteful expenditure was R4.5-billion,” he said.
Whereas municipalities are failing to provide services, or use their budgets properly, City Press reported that Salga was up in arms over the municipal cost containment regulations. These include getting rid of credit cards and clamping down on catering, mayoral vehicle expenditure and the use of consultants.
The regulations were to be implemented without treasury seeking consensus from the department of co-operative governance and traditional affairs.
Salga chairperson Thembi Nkadimeng, who is also the mayor of Polokwane, labelled the measures as unfair, adding that it made it look as if councillors were extravagant. She also said some councils relied on consultants because they struggled to attract and retain skills in critical areas.
On Wednesday, Mboweni tweeted that he had met Salga this week and reached an agreement that municipal credit cards were out and mayoral vehicles will be capped at R700 000. They also agreed that the measures will be implemented from July.
On Thursday, treasury said the cost containment regulations should be read in the context of giving effect to the National Development Plan strategy to build a capable state.
“This also requires the municipality to develop a plan to reduce the reliance on consultants. The measures also require that transfer of skills from consultants to officials take place. So, if there are vacancies, the municipality is required to advertise such positions and fill them with the appropriate skilled officials.
“The AGSA [auditor general] had raised findings on the excessive use of consultants and the associated cost to municipalities over a number of years. The quality of service is something that municipal managers must manage, which speaks to the monitoring of contracts and quality of services received, as well as value for money. The AGSA has also commented on the quality of services offered.”