Picture: Patrick Mtolo – eSikhawini residents complain about water leaks. Some worrying trends in budgetary and expenditure patterns in municipalities include under-expenditure, a decline in the ratio of funds spent on capital projects and the reduction in repairs and maintenance expenditure, the writers say.
By Michael Sutcliffe and Sue Bannister
A scan of media across the country writing on municipal matters illustrates the range of issues residents and businesses face in municipalities. These range from challenges in the provision of basic network services; outstanding debt to Eskom or water boards; the impact theft has on basic services; ongoing protests and road closures, and issues that have significant environmental and infrastructural damage.
No matter what one may think of the media reports, we must be thankful that freedom of the media is alive and well in South Africa.
However, there is a concern that much of our investigative journalism focussing on local level issues is relatively poor. Much is made of political spats in municipalities with very little focus on the administrations that actually run our cities. The result of this is a perception that everything in local government is bad, whereas when looking into the intricacies of municipal administration, it's crucial to recognise both achievements and shortcomings.
The issues discussed below focus on some of the key issues requiring immediate attention and reform within municipalities, underscoring the importance of a balanced and informed discussion on governance and service delivery.
Firstly, it's important to acknowledge the good work happening within our municipalities. Our discussions should include the accomplishments achieved through existing budgets and programmes, rather than solely concentrating on the shortcomings. All governments have to make difficult choices, and a key area needing greater focus is the debate over how efficiently, economically, and effectively funds are being spent in our local governments.
Municipalities spend more on public infrastructure compared to provincial and national governments (excluding major state-owned entities), and whilst it is true that some of this spending may not be well spent, it's important to remember that the majority of expenditure is vital for providing necessary services and infrastructure.
At the same time, we must also give consideration to some worrying trends in budgetary and expenditure patterns in municipalities. These include under-expenditure, a decline in the ratio of funds spent on capital projects and the reduction in repairs and maintenance expenditure.
By way of example, in 2012/13 approximately R35 billion remained unspent by municipalities. This has grown to R71.4 billion in 2022/23, representing 12 percent of the overall municipal budgets which remain unspent. Many of the key factors behind this include poor budgeting, reduced revenue collection and poor management.
There has also been a decline in the ratio of expenditure of operational to capital expenditure. In 2012/13 almost 20 percent of the aggregate expenditure was on capital projects, but by 2022/23 this has declined to only 12 percent being spent on capital projects. This decline has meant that less infrastructure is being developed.
And, at an operational level, repairs and maintenance expenditure patterns have remained low and in many cases have declined. This is an important factor behind water losses, electricity outages, sewerage spills and so on.
The solutions to this poor budgeting, expenditure and implementation needs more specific analysis of each municipality, but they include improving leadership, particularly at an administrative level, improving consequence management, and including support provided to reverse these trends. In this regard municipal officials must account for what is not being done by starting with what is already budgeted for.
Second, here is also a need for a better understanding of how the challenges faced by our municipalities are being addressed. In this regard, every quarter, National Treasury publish reports on the in-year revenue and expenditure patterns of all municipalities in South Africa, and such consistent reporting is hardly noticed by the media and the public at large. These data contain a very useful index measuring financial distress and this allows you to track how each municipality is doing in terms of being able to pay particularly major debts such as bulk water and bulk electricity. The index ranges from zero (no immediate financial challenges) to four (where a municipality is in serious financial distress) in terms of Sections 138 and 140 of the Municipal Financial Management Act.
The following table shows the overall breakdown of financial distress for the 257 municipalities:
| Category | Financial Triggers | Municipalities | ||||
| 0 | 1 | 2 | 3 | 4 | ||
| A | 4 | 3 | 1 | 8 | ||
| B | 23 | 50 | 31 | 40 | 61 | 205 |
| C | 9 | 11 | 7 | 14 | 3 | 44 |
| Total | 32 | 65 | 41 | 55 | 64 | 257 |
National Treasury does not explain what the root causes are for this financial distress in each municipality and what is being done by the municipality to turn things around. That is the primary responsibility of Municipal Managers and Chief Financial Officers and they should bring the public into their confidence so that the short-, medium- and long-term actions to reverse these trends are better understood.
Thirdly, we must become more evidence-led. Census 2022, published this year, provides clear evidence of the degree to which we are reaching our developmental goals whilst urging us to be more evidence-led in what we do. The improvement in the delivery of basic services since the 2011 census is significant as shown by the following:
Whilst we have significant change, we also have significant challenges confronting us, including the need to ramp up service delivery, infrastructure renewal, maintenance and repairs. Improved access also means we must ensure we both conserve scarce resources and ensure there are long-term plans in place to also increase the supply of resources such as water, energy, etc. to meet future demand.
Fourthly, we must ensure our municipalities are more capable to do the job expected of them. We cannot have technical and professional competence levels in all three spheres of government declining to the extent that we now have. And we need to address the problem of young professionals choosing to work in government work as a last resort given the perceived reputational risk of being associated with incompetence and corruption.
Fifth, our municipalities must become more transparent, and this will greatly assist in reducing the significant levels of corruption eating away at the fabric of our society. We believe that all procurement information should become publicly available once supply chain processes are concluded. Procurement appeals processes should be independently done, with such bodies having the right to stop tender awards whilst reviews are being conducted. All senior management should have lifestyle audits conducted and these should be made available publicly.
Finally, we must collectively ensure that senior management are far more responsive, and that they should be held to account by their councils when they have failed to carry out their duty to respond to the right to know.
These six, relatively simple, strategies require an all of society approach, working with our municipalities to promote the vast amount of good being done, and to also reverse the unwelcome trends.
Michael Sutcliffe and Sue Bannister are directors at City Insight