Each year, National Treasury transfers billions to municipalities through the “equitable share” to provide basic services to poor households and subsidise municipalities that can’t raise enough revenue to fund their operations. This year, for instance, Joburg received R7.57bn.
Only, the money often isn’t going where it should.
According to the Organisation Undoing Tax Abuse (Outa), Joburg says 130,000 households benefit from its indigent policy. At the National Treasury rate of R567.12 per household per month, that comes to a grand total of R884m – just 12% of the R7.57bn equitable share the municipality receives, says Outa’s local government executive manager Julius Kleynhans. It leaves billions unspoken for.
Meanwhile, hundreds of thousands of households are falling through the cracks. The Public Affairs Research Institute’s Tracey Ledger writes that the city’s own data shows that a third of households (630,000-700,000) fall below the lower-bound poverty line – the city’s benchmark for social support. Yet they aren’t receiving it, leaving them on the hook for services they can’t afford.
It’s entirely unsustainable. “You see a lot of these community members in bad debt, but a lot of them should have actually been subsidised,” says Kleynhans.
This chaotic management of indigent registers and a culture of non-payment have made a mess of municipal balance sheets: by the end of September, residents owed municipalities R386.5bn. And much of this outstanding debt will never be paid: an average 10.9% of operating expenditure across municipalities last year was impaired debt, according to Stats SA.
This has a cascading effect: higher unpaid municipal bills lead to an increase in illegal connections, which damages already parlous infrastructure. And, in a vicious circle, this strain on municipal finances then eats into service delivery, disproportionately affecting the poor, who cannot afford alternatives, says Municipal IQ CEO Kevin Allan.
Now, in fairness, Treasury provides the equitable share grant without conditions, so it can be used to fund other costs. But this money, make no mistake, is meant to offset poverty.
“Seeing how poorly Joburg is [managing] its finances and how it is [raising] debt to try to keep afloat, one wouldn’t be surprised if a non-conditional grant is sucked into the pot to pay for vanity projects and other costs,” says Kleynhans.
In part, the money isn’t going to the right places because many municipalities “lack the administrative and technical capacity to do this well, or are plagued by mismanagement and corruption”, says the Bureau for Economic Research (BER).
That’s not hard to believe, given the wanton spending – think bodyguards, golf days, blue-light brigades, abandoned projects, and white elephant stadiums dotted around the country.
And that’s before you factor in the astronomical inflation of prices for goods and services. Outa’s Kleynhans, for example, has found that Joburg budgets R1,200/m2 for pothole repairs, whereas a state-of-the-art private sector fix costs R350/m2.
True, not all municipalities are basket cases, but there’s clearly a crisis. As it is, 41 of 257 municipalities are under administration; and, according to Treasury, 157 are in a state of distress, with 96 adopting unfunded budgets, deputy finance minister Ashor Sarupen writes in Business Day.
Throwing more money at the issue won’t make it go away.
Technical failure
Still, the problem, at least in part, is financial, says Bheki Stofile, president of the South African Local Government Association; municipalities simply aren’t generating enough money.
There are complicated reasons for this. For one, the 1998 white paper on local government (now under review) assumed municipalities would generate 90% of their own revenue. But by 2020, Stats SA revealed that municipalities were raising just 72% of their own funds on average – falling to just 28% in rural areas.
The problem at the heart of this, says Stofile, is the structure of the municipal system. Right in the beginning, local government boundaries were drawn in ways that left many unviable. The upshot is that in poor, often rural, areas, there simply isn’t enough money to collect, he says.
Velenkosini Hlabisa, minister of co-operative governance and traditional affairs, says this illustrates why municipal boundaries must be redrawn, merging the more sustainable municipalities with those that are struggling.
But this perhaps focuses on the symptoms, rather than the cause.
For Kleynhans, municipalities must return to their core function: delivering basic services. Rather than being saddled with running clinics, sports and arts, they should focus on providing water, electricity, sanitation, collecting refuse, and maintaining infrastructure.
This, along with zero-based budgeting – justifying expenditure in each new period rather than using past spending as a guide – and an accurate client register to ensure correct billing, would be the first steps in turning around struggling municipalities, he says.
And, of course, ensuring competent and clean leadership.
This isn’t as easy as it sounds, as many municipalities lack technical expertise. The result is that critical functions are then outsourced to consultants, often at exorbitant cost.
Engineers – central to infrastructure development and maintenance – have left municipalities in droves since the 2000s, Stofile points out. And other posts remain empty too: of 339,163 municipal positions, 38,363 remain vacant, the BER says.
The real problem, says Kleynhans, starts at the top – with unqualified municipal managers and CFOs.
He points to a metro municipal manager with only a bachelor’s degree and five years of experience running an entity with a budget of tens of billions of rands. “Compare that to a listed company with a similar budget and the CEO will probably be one of your best qualified, most ambitious individuals,” he says.
But the issue extends to political leadership. Councillors need no minimum qualifications, yet they vote on budgets. Some “can’t even read financial statements, but they make financial decisions on our behalf and have oversight and vote”, says Kleynhans.
Joburg’s disastrous former mayor Kabelo Gwamanda, for example, had only a grade 10 qualification.
“You can professionalise this stuff,” says Hlabisa. “But if you bring a mayor who cannot comprehend the complexities of the municipality … who cannot think and imagine the future and act accordingly, you will miss it.”
Cadre deployment
Talk leadership, and you can’t avoid confronting the reality that politicians, deployed to municipalities by their parties are often more accountable to political bosses than to residents. And with municipalities a hub of patronage, political interference is rampant.
“Local political fiefdoms have often hijacked localities, if not entire municipalities, and [they] exert control while ignoring rampant corruption and failure,” says Municipal IQ’s Allan.
That’s unlikely to change, he notes, without a shift in culture at national, provincial and local level. And it’s unclear there’s political appetite for that.
As it is, coalition fights have badly destabilised councils.
Joburg has had eight mayors since 2021 and each change causes the administration to grind to a halt while budgets are reprioritised, says Kleynhans. Budgets, he says, have been “completely manipulated for political gain”.
This is all the more problematic because of the way the system is set up. Mayors have “extensive powers” over budgets, the BER’s Roy Havemann and Claire Bisseker write, so they are able to “table the budgets they want”.
It’s something of a relief that this would appear to be an easy fix, they argue: amend the Municipal Financial Management Act, and you can give more heft to the finance function.
While much of this looks pretty dismal, Hlabisa believes things are changing politically.
The 2024 election, in which the ANC lost its national majority, highlighted the power of disaffected voters. He reckons this means parties will be more likely to deploy better qualified members to municipalities from national and provincial level.
“Because if the municipality works, it becomes a centre of attraction to foreign investors and businesspeople,” he says.
Troubleshooting fail
Fixing municipalities is evidently not easy. Of 80 municipalities placed under administration, Stofile says not one has meaningfully recovered. Emfuleni, for instance, has been under administration since 2018.
In part, this is because administrators are often parachuted in without support – or without the skills to lead a turnaround.
Hlabisa says there’s no use sending “cadres whom you’re just giving a job”. Rather send someone “who will turn things around based on their skills in their previous place of work”.
But even promising interventions haven’t been wildly successful.
Take the Eskom debt relief programme, under which municipalities qualify to have part of their debt written off if they meet specific governance and budgetary conditions. By October, only 14 of 72 municipalities had complied with the conditions.
It’s not that the Eskom programme can’t work – it’s the “best opportunity we have for change”, says Allan. But for this to happen, the government needs to back Treasury “in taking action against municipalities that refuse to join the programme or adhere to its stipulations”.
It shouldn’t be this way. Municipalities don’t collapse overnight; they report their financial position every month, which means there should be room for early intervention.
This speaks to perhaps the most crucial reason why municipalities have failed: the manifest lack of political will. As finance minister Enoch Godongwana conceded in parliament, the national government has asked provinces to intervene in troubled municipalities – but the uptake, he said, has been “slow”.
Why the inertia? Perhaps that’s an element of optics. If the same party leads a municipality and a province, it might resist intervention in the first place, seeing it as an admission of failure. Or, as Kleynhans puts it: “The player and referee is the same here.”
But it’s also a function of the fact that there’s simply no accountability for failure.
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