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Cross-cutting problems lead to service-delivery inefficiencies, says new report

A Bureau for Economic Research (BER) note released on Wednesday said that there were a number of cross-cutting problems that inhibited basic service delivery. 

The first relates to inefficiencies in the procurement process that were already highlighted as problematic by the National Development Plan in 2012, and remain a concern. 

These inefficiencies were aggravated by the fact that decision-making power throughout the process often lies with managers and staff who do not have the technical insight and competencies to ensure the right outcomes. 

Speaking to the Mail & Guardian, BER director, Professor Johann Kirsten, said the problem with the procurement process lies with the way in which the specifications for tenders are drawn up. 

“The people that write the specs for tenders are not qualified in terms of their job category. So that creates a problem. It’s a mix of things that actually result in this dilemma, but the fear of making a mistake is probably the driving factor … We still have a large chunk of regular expenditure and wasteful expenditure, despite all these controls,” he said. 

According to the recent local government audit outcomes report, published by auditor general Tsakani Maluleke, and undertaken in terms of the Municipal Finance Management Act, that institution was unable to audit contracts worth R1.43-billion, because municipalities did not provide the required documentation and evidence to support the procurement processes. The audit outcomes report is based on audit work performed on municipalities and their entities.

A second problem inhibiting service delivery, according to the BER, is that the auditing environment focuses more on audit outcomes than on municipal performance.

“There is no denying the need for municipalities to be  audited, but the focus on audit compliance and the risk of expenditure being classified as fruitless and wasteful creates a disincentive for managers to undertake projects that require working across different spheres of government or with the private sector,” according to the note. 

Noncompliance and irregular expenditure

The third problem highlighted by the BER is the supply-chain management process, which was designed to curb fraud and corruption, but instead weakens efficient and effective service delivery. 

In the audit outcomes report, Maluleke said: “As in previous years, noncompliance with supply-chain management legislation was prevalent, significantly contributing to the irregular expenditure of R26-billion. This amount is likely to be even higher, as just over a third of municipalities were qualified on the completeness of their disclosure or were still investigating the full extent of the irregular expenditure.”

The BER said service delivery in metropolitan municipalities creates a very different challenge to service delivery in sparsely populated rural areas, which also affects how much revenue a municipality can generate.

“Many of the local municipalities in disadvantaged communities don’t have a proper tax base. They usually have communal land and are unable to tax it … They, therefore, rely on grants and transfers from the national government to help them cover costs,” Kirsten said. 

The final problem hampering service delivery, according to the BER, is cadre deployment, which has resulted in a skills shortage that exacerbates the issue.

“Even in the well-run municipalities you have people that are connected to the mayor … and you end up missing out on the critical expertise that you want to have so they can implement the services to your populace,” Kirsten said.

According to the note, the consequences of these problems manifest in the overspending on operational budgets, low levels of capital spending and insufficient spending on repairs and maintenance. In contrast, there is excessive spending on contracted services, and high levels of fruitless, wasteful and irregular expenditure. 

“Local government loses billions of rand annually because of interest and penalties, which form a significant portion of the R3.47-billion of fruitless and wasteful expenditure reported in 2019-20”, Maluleke said in her report. 

Anathi Madubela is an Adamela Trust business reporter at the M&G.

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Anathi Madubela
Anathi Madubela is a business journalist with a keen interest in the retail sector.

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