Experts warn of instability if dysfunctional municipalities continue 'spending money it does not have'

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A man walks past trash on a road in Lichtenburg, North West.
A man walks past trash on a road in Lichtenburg, North West.
Deon Raath
  • Experts have weighed in on the problems facing South Africa's municipalities.
  • According to an August 2021 report, 163 of the 257 local municipalities were under financial distress.
  • More than 100 local councils have unfunded budgets.

South Africa's most dysfunctional municipalities should stop spending money they do not have if they are to remain sustainable.

This was the common theme among experts who presented plans to turn around the country's poor performing municipalities at the  SA Local Government Association (Salga) national conference in Cape Town.

Financial and Fiscal Commission commissioner Trevor Fowler told delegates one of the major problems in local government was to get people skilled in finance.

"The way that additional money is spent is important. Some of [those] funds should be spent on economic issues, and specifically, municipalities are generally responsible for infrastructure. But it's spending on economic infrastructure. Sometimes you have to make some tough decisions. When unemployment is high, you have to try and stimulate the economy," he said.

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In August last year, the Department of Cooperative Governance and Traditional Affairs reported to Parliament that 163 of the 257 local municipalities were under financial distress.

Another major financial challenge was that 108 municipalities had unfunded budgets, which meant these councils would not have enough money to meet its expenditure.

While 64 municipalities were considered dysfunctional, 29 had been placed under administration in line with Section 139 of the Constitution.

Fowler warned that if municipalities did not stimulate the economy, the unemployment situation would worsen.

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"There will be less money received by the municipality, and it is a difficult step to take, but it is something you will have to make a decision on. It's not just about investment in basic services, but is also about making an economic environment that the Constitution speaks of. Governance around finances is important.

"We often don't look at the governance issues relating to finances and ensuring that you employ the right people for the right positions. If you don't have financial expertise, you won't have the money to spend," he said.

Furthermore, Fowler warned that the problematic spending practices would cause severe problems.

"Spending money you don't have... once you do that, you're not going to maintain the services. [A lack of maintenance] results in the collapse. Those key governance concerns need to be addressed," he said.

Thina Nzo from the Public Affairs Research Institute said many municipalities were affected by a plethora of issues.

"Local government became a victim of the slow economic growth. Municipalities are not able to balance their sheets when it comes to revenue collection and also operational budgets. We had to look at the equitable share again. We still have a large number of rural municipalities, and we see that developments are always around the urban cities," she said.

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She also said rural municipalities were hamstrung by a lack of industries to contribute to revenue collection.

"How sustainable are these small municipalities? Over the years, we have been seeing that they are struggling with revenue collection," she said.

"One of the key factors, unfortunately, [is that] the system cannot be sustained as it is. We are currently in a position where municipalities cannot even maintain their infrastructure. We need a much more thorough engagement to turn things around," she said.

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