Charts That Show the Financial Woes of South African Cities
(Bloomberg) -- The health of South African municipalities’ finances is deteriorating and instead of taking remedial action, staff at councils are threatening and intimidating the auditors probing their accounts and giving advice, the Auditor-General said.
Auditor-General Kimi Makwetu presented findings on municipal finances for the year through June 2018 on Wednesday. These charts show the dire state of councils across the country.
Of the 257 audited municipalities, the outcomes of 63 regressed while those of 22 improved. Only 18 received a clean audit and no municipality in the Free State, Limpopo and North West provinces got clean audits. There was non-compliance with key legislation at 92% of municipalities, the highest level since the 2012 financial year.
The majority of municipalities are in a precarious financial position. The Auditor-General saidintervention is needed at 39% of councils, which means that they are in a vulnerable financial position and might be unable to continue operating or that their financial statements weren’t reliable enough to analyze. Municipalities in a vulnerable financial position recorded almost 1 billion rand in fruitless and wasteful expenditure in the year.
The report shows irregular expenditure declined to 25.2 billion rand ($1.8 billion) in the 12 months through June 2018 from 29.7 billion rand in the previous year. That’s the first decline since 2015 but the amount could be higher because 46% of the municipalities didn’t completely disclose irregular spending or revealed in their financial statements that they did not know the full extent of irregular expenditure, Makwetu said.
The Auditor-General was unable to audit the procurement of 1.22 billion rand due to missing or incomplete information and flagged contracts awarded to state officials, local council employees and their family members as a concern. There was uncompetitive or unfair procurement processes at 88% of municipalities, most of which relate to not procuring three written quotations or not having competitive bidding.
Delinquent cities have wracked up massive debts to utility companies, including Eskom Holdings SOC Ltd., hampering the delivery of services. Municipalities owe the cash-strapped power provider 20 billion rand. Almost half of this is in arrears, Makwetu said.
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