Treasury and auditor-general join forces to cut wasteful expenditure in municipalities
The Treasury will work with the office of the auditor-general to reduce wasteful, irregular and unauthorised expenditure in municipalities, finance minister Tito Mboweni said on Wednesday.
He also urged law enforcement agencies to act against those implicated in wrongdoing.
Auditor-general Kimi Makwetu announced in May that audit outcomes in municipalities have continued to regress, with irregular, fruitless and wasteful expenditure ballooning more than 70% for the 2016/2017 financial year. Irregular expenditure specifically increased 75% to R28.4bn in 2016/17, up from R16bn in 2015/16.
Mboweni said in his maiden medium-term budget policy statement in parliament that this is the first step to strengthen financial management in the government.
The second step is the deployment of skilled professionals at local government level to boost revenue collection and attain developmental objectives.
“Many of these are retirees that have heard the president’s ‘thuma mina’ call,” Mboweni said, referring to the call to action President Cyril Ramaphosa made during his state of the nation address in February. Mboweni said there will also be financial recovery plans for nonperforming departments.
Over the medium-term expenditure framework period, R415.5bn will be transferred to local government, including R146.3bn in infrastructure conditional grants.
The largest transfer to municipalities is the local government equitable share, which will grow 9.9% in 2019/20, 9.7% in 2020/21 and 8.6% in 2021/22.
“These above-inflation increases account for growth in household numbers and higher bulk water and electricity costs. The government will strengthen municipal capacity to improve the use of these allocations,” says the budget policy statement.
Meanwhile, policy reforms to clarify the role of development finance institutions in municipal borrowing and to regulate municipal development charges are under way to broaden municipal access to private capital markets.
Mboweni said part of Ramaphosa’s plan to stimulate the economy focused on investing in municipal social infrastructure.
“All South Africans share the pain of poorly performing municipalities: potholes, broken street lights, roads that flood when it rains, and challenges with electricity. We are acutely aware that some municipalities are facing serious capacity constraints in executing their plans and programmes,” Mboweni said.
He said the auditor-general has consistently shared audit messages that emphasise the importance of accountability in the management of municipal affairs, but that in 2018, 113 municipalities adopted unfunded budgets, up from 83 in the previous year.
“Municipalities owe more than R23bn to service providers — mainly to Eskom and water service agencies. In many cases, like in the Modimolle-Mookgophong municipality, the financial challenges are a reflection of weaknesses in governance, or even fraud and outright corruption,” Mboweni said.
He said the funds lost by municipalities in the collapse of VBS Mutual Bank, in which municipalities had deposited more than R3bn since 2015, of which R1.2bn was still deposited with the bank when it was placed under curatorship in March, “offer a dramatic illustration of how greed and corruption impacts the achievement of developmental objectives”.
In terms of what the government will do, Mboweni said the Treasury will work closely with the department of co-operative governance & traditional affairs to deal with financial misconduct in all spheres of government. He said measures were being developed to improve transparency and governance processes.
“Key is the employment of qualified, competent and incorruptible officials. We need to restore a culture of compliance with the Public Finance Management Act and Municipal Finance Management Act in all organs of state,” he said.
He added that civil society can help, citing the recent example of Emalahleni in Mpumalanga where citizen associations successfully challenged the local municipality to implement the measures prescribed by law to address financial problems.
On October 9 the Save Emalahleni Action Group obtained a court order against the provincial executive to compel it to intervene in the municipality’s financial affairs.