LUCAS NOWICKI: Local government crooks are killing towns and cities

South Africans are no doubt suffering from “corruption fatigue” as an endless stream of stories documenting blatant corruption are published on an almost daily basis. In that context, it is perhaps little surprise that the auditor-general’s latest scathing report on R26bn irregular expenditure by SA’s municipalities was quickly lost in this fast-paced SA news cycle, which thrives on more sensational tales of grand corruption by politicians and corporations at national level. 

However, the near collapse of basic services in municipalities across the country poses serious risks to our constitution and democracy. Corruption, maladministration and fraud at a local level have rapidly eroded citizens’ access to health care, water and sanitation, education and a healthy living environment, while general infrastructure has faced a dramatic decline. People suffer when local governments fail to deliver on their constitutional obligations, and already grotesque levels of inequality are made worse.

The 2019/2020 auditor-general municipal report and the third Covid-19 Relief Special Audit report, presented to parliament by auditor-general Tsakani Maluleke, are distressing for a number of reasons. Chief among these is that the special audit took place during the Covid-19 pandemic that saw 3-million South Africans lose their jobs in April-June 2020. This led to a substantial increase in unemployment, hunger and evictions, and millions of applications for the measly and poorly implemented R350-per-month Social Relief of Distress Grant.

This was a time when good governance, transparency, communication and efficiency were most required to meet the urgent needs of local communities. Yet instead, the auditor-general’s report scathingly reveals that “the impact of compromised control environments and poor financial and performance management was even more pronounced in the midst of a pandemic when vulnerable citizens relied on local government for support”.

The auditor-general found that more than one in four municipalities in the country are near financial collapse, while 86% of municipalities were not compliant with public finance and supply chain management legislation, resulting in more than R26bn irregular expenditure

The report documented a worrying trend of municipalities outsourcing part of their financial responsibilities to private “consultants” — costing them more than R1bn but bringing little improvement in the state of financial reporting. These private consultants took over a range of tasks but were primarily used for asset management and the preparation of financial statements. The auditor-general concluded that “the use of consultants was not necessarily effective” and that “67% of the municipalities that did not provide adequate records appointed consultants”.

Many of the consultants were paid for doing the same task a state official was being paid to do. This is one of the reasons 46% of municipal budgets are spent on salaries, often at the cost of paying Eskom, water boards or maintaining infrastructure.

SA is no stranger to financial consultants making a mint from corruption and adding little value. In The Enablers investigative report, Open Secrets and Shadow World Investigations revealed how mega-consultancy firms such as Bain and McKinsey played a central role in enabling the looting and destruction of the SA Revenue Service, Transnet and Eskom. Financial consultants face little scrutiny despite the frequent conflicts of interest, which often results in them choosing profit over principle.

In addition to their financial reporting obligations, municipalities are supposed to submit a report on their service delivery performance. In the 2019/2020 financial year, service delivery performance dropped considerably, due to “unreliable performance planning” and blatant flouting of national procurement policies, which undermined the ability to respond to the pressing infrastructural, social and economic needs of their constituencies, often leading to social unrest.

This erosion of citizens’ basic rights due to corruption, fraud and mismanagement at a local level is illustrated by the case study of Makana Municipality in the Eastern Cape, one of the municipalities in the province that received a disclaimer in the recent audit.

Service delivery in the once model municipality that hosts the National Arts Festival and Rhodes University is now near nonexistent. There are water cuts for days, sometimes weeks. Makana is now using a rotation system, which means the estimated 70,000 residents have access to water only every second day. However, this water is undrinkable, which means people have to buy drinking water at R1/l.

In 2015, auditing firm Kabuso released a damning forensic report after investigating Makana’s finances, and implicated several officials in serious acts of corruption and fraud. Yet to this day no-one implicated in the report has been held to account.

Without any accountability for blatant fraud and corruption, flouting of the procurement process and violations of the Public Finance Management Act, local government officials will continue to be shielded from consequences from provincial, or national, governments. This environment of impunity and lack of will to recover lost funds is reflected in the fact that 48% of municipalities did not investigate the previous year’s irregular expenditure identified by the auditor-general.

The result of inaction is that Makana’s dilapidated infrastructure has continued to decline, and the water situation has continued to worsen. In 2019, the town went without water for more than a week, resulting in humanitarian organisation Gift of the Givers intervening to prevent what was becoming a serious health risk. Makana is fortunate to have a vibrant community of grassroots activists, civil society organisations and public interest lawyers, who are not afraid to challenge the institutions of local government.

In 2020, the high court in Makhanda ordered the dissolution of Makana municipality for failing to provide basic services to its citizens. The application to do so was brought by the Unemployed People’s Movement, a grassroots movement based in Makhanda (formerly Grahamstown) and led by activist Ayanda Kota. Judge Igna Stretch ruled that the conduct of Makana Municipality had been inconsistent with the constitution “by failing to promote a healthy and sustainable living environment”, which municipalities are enjoined to do by section 152 of the constitution.

While the provincial government rigorously appeals the landmark judgment, Makana’s degradation continues at a rapid pace. In July, the town of Makhanda was shut down for a week due to service delivery protests, initiated by taxi associations with broad support from the community. The same demands of access to a reliable water supply, fixed roads and a healthy living environment were echoed by increasingly frustrated residents, who now have little to lose.

The story of Makana is one example of how a municipality can collapse because of corruption and mismanagement. More importantly, it is an example of the social cost of corruption in local government, and the direct risk it poses to the basic human rights enshrined in our constitution.

There is an urgent need for long-term systemic solutions to the problems facing local government. These solutions need to integrate activists, social movements and marginalised communities in decision-making processes at the local level, as well as giving them the space to hold government officials to account for the misuse of public funds.

• Nowicki is with Open Secrets, a non-profit organisation combating economic crime.