ANALYSIS: Municipalities owed Eskom R9.1bn last year - 10 statistics that show how they wasted your money

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Auditor General Kimi Makwetu. (File, Gallo Images)
Auditor General Kimi Makwetu. (File, Gallo Images)

The Auditor-General of South Africa, Kimi Makwetu, has once again laid bare the enormity of his job, describing the difficulty of not only compiling the 2017/2018 municipal audit report, but also the continued dismissal of his office's recommendations by politicians and civil servants.

Makwetu released the latest municipal audit report in Pretoria on Wednesday.

His briefing painted a picture of councils that do not have the necessary skills to run their finances effectively, and while there were signs of improvements in certain areas, many municipalities were still performing poorly.

The following statistics found in his report indicate just how serious the problem of under-performance is at local government level:

1. Only 18 out of 257 municipalities in South Africa received clean audits

In the 2016/2017 financial year, 33 out of 257 municipalities received clean audits but 12 months later this dropped to 18. So how does a municipality secure a clean audit? "Well, it managed to produce quality financial statements and performance reports, as well as complying with all key legislation, thereby receiving a clean audit," the Auditor-General's office said in a statement. This is a worrying regression for Makwetu.

2. One in three municipalities spend more than they earn

Makwetu reported that 34% of municipalities could not balance their books, recording expenditure that exceeded their income. These councils reported a combined deficit of R5.8bn. He pointed out that many municipalities "are just not managing their finances as well as they should".

"For example, we are reporting fruitless and wasteful expenditure that amounted to R1.3bn for the period under review. This is effectively money lost. The potential R1.6bn loss of investments made with VBS Mutual Bank also significantly weakened the financial position of the 16 affected municipalities, and had an impact on the delivery of infrastructure and maintenance projects," said Makwetu.

3. Only six of the nine provinces had municipalities with clean audits

While six provinces have municipalities with clean audits - namely the Western, Eastern and Northern Cape; Gauteng; Mpumalanga as well as KwaZulu-Natal - only two have more than one council that complied with key legislation and produced quality statements and reports. The Western Cape is home to 12 municipalities that received clean audits, while the Eastern Cape had two. None of the municipalities in the North West, Limpopo and Free State received clean audits.

4. Municipalities owe Eskom R9.12bn as of June 2018

Now we know Eskom could use every cent it is owed, and the country's municipalities owe the power utility a lot of cents. The 2017/2018 municipal audit reveals that the top three contributors to the overall arrears are Emalahleni in Mpumalanga, which owes R1.87bn, Mathjabeng in the Free State, which owes R1.84bn, and Ngwathe, also in the Free State, which owes R92m. The report notes that municipalities in the Western Cape were prompt payers and did not owe Eskom a cent as of June 2018.

5. Financial taps run dry. Municipalities owe water boards R5.85bn as of June 2018

If you thought Mathjabeng's debt to Eskom was significant, you are going to change your mind when you find out how much it owed its water board at the end of June 2019 - R2.3bn. Following the Free State municipality is the Mopani district council in Limpopo which owed R84m and Muskaligwa which owed its water board in Mpumalanga R49m. Operations in the finance departments of municipalities seem to be going swimmingly, with none of them owing their water boards at the end of June last year.

6. 18% of councils did not have municipal managers at some stage during the 2017/2018 financial year

The Auditor-General noted 43 municipal manager vacancies during the period under review, with 33 of these positions remaining open for six months or longer. The audit also showed that when municipal managers were appointed they stayed in their jobs for an average of 32 months.

7. Chief financial officers stay in their positions an average of 37 months

The 2017/2018 report also found that chief financial officers (CFOs), key drivers of effective and accurate accounting, stayed in their municipal jobs an average of three years and one month. It also found that there were 51 vacancies for CFOs, with 36 of these positions being vacant for six months or longer.

The audit noted that greater stability in key positions such as that of municipal managers and CFOs were linked to better audit outcomes.

8. 97 municipalities awarded contracts worth R501m to family members of employees

In his "Summary of Audit Outcomes" the Auditor-General does not state whether these contracts were prohibited or not.

9. R921m in municipals contracts were issued to other state officials

Makwetu notes that the awarding of such contracts is prohibited. Despite this, 138 municipalities awarded these "prohibited" contracts.

10. Eight municipalities did not submit their financial statements by January 31, 2019

The "cut-off date for inclusion of the audit outcomes in this report is January 31, 2019", he says in the 2017/2018 audit. Eleven others met this deadline, but submitted their financial statements late, missing the first deadline.

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