The auditor-general’s 2017/18 financial audit of municipalities, released in 2019, revealed a severe lack of due diligence in project planning, improper financial management, and a significant decline in service delivery. The causes are varied but can mainly be traced to a lack of accountability, poor governance, and capacity challenges. Trialogue writer Khumo Ntoane explores some of the ways in which businesses can support municipalities.
The high cost of municipal mismanagement
Municipalities’ income sources can be grouped into two main segments: self- generated income from the collection of property rates, levies on services such as water, electricity, sanitation and removal of refuse and fines; and income from fiscal transfers and government grants. Statistics South Africa’s Quarterly Financial Statistics of Municipalities survey, released in December 2018, reported that approximately three-quarters (72%) of municipal income was self-generated; 42% of which came from service charges. The balance of municipal income was generated through transfers and grants from national and provincial government, as well as donations from the public.
Despite legislation such as the Municipal Finance Management Act and the Municipal Systems Act that guides the revenue management of municipalities, the auditor-general’s municipal audit report found that accumulated unauthorised, irregular and wasteful expenditure at municipalities had reached R122 billion in 2017/18. Performance reports by 65% of municipalities were dubious and close to unusable, with just 18 of the 257 audited municipalities (7%) managing to produce compliant financial statements and performance reports to receive clean audits – a comparative decline from the 33 (13%) clean audits produced in 2016/17.
The most underperforming and economically unstable municipalities in the auditor-general’s report had issues ranging from improper investment to misappropriation of municipal funds. In the North West, for example, reckless investment in the now liquidated VBS Mutual Bank has left some municipalities unable to deliver basic services, leaving towns with dry taps and overrun by rubbish and sewage.
The auditor-general’s report also highlighted the inability of municipalities to collect debt from consumers. According to the Helen Suzman Foundation brief, Municipal Consumer Debt, reasons that consumers were not paying their debt ranged from unemployment and poverty, to inaccurate billings, poor creditor management and general dissatisfaction with service delivery. Service delivery protests have, in fact, more than doubled in the past decade. This increase was reported by the local government data and intelligence company, Municipal IQ, which recorded 237 protests across the country in 2018 demanding better service delivery, job opportunities and municipal governance.
Of course, consumers of municipal services are not limited to households. Companies rely on municipalities to provide uninterrupted services to ensure the smooth running of their businesses. Poultry producer Astral, in Mpumalanga, has reported a lack of water and electricity; Pioneer Foods has experienced limited access to electricity in its operations in the Eastern Cape and the Free State and, in KwaZulu-Natal, Island Hotel sued the eThekwini municipality for failing to adequately manage the stormwater infrastructure which caused damage when the area flooded three years ago. Smaller businesses are often the worst affected by municipal service delivery failures since they are less likely to have alternative sources for essential services.
How government supports municipalities
Government spends in excess of R2.5 billion a year on various forms of capacity building and support for local government which includes infrastructure development, municipal finance improvement, planning for informal settlement upgrading, supporting metros with service delivery optimisation and managing urbanisation.
The Municipal Infrastructure Support Agent (MISA) was introduced in 2012 to upskill municipal employees’ technical, planning, implementation and service delivery capabilities after acknowledging lack of capacity as a core issue among municipalities. However, MISA has had problems of its own; experiencing capacity issues with some of its programmes as recently as 2018 and needing to outsource skilled professionals; leaving vacant the key role of facilitating skills transfer to municipal employees.
The Department of Cooperative Governance and Traditional Affairs established the Back-to-Basics programme in 2015 to ensure that municipal vacancies are filled with competent management, finance, corporate services, infrastructure, community development and development planning personnel.
In partnership with the South African Local Government Association (SALGA), the programme monitors the functionality of local government labour forums to identify weaknesses and intervene where possible.
How businesses can support municipalities
1. Partnering for risk resilience
According to state-owned short-term insurer, Sasria, municipal insurance claims related to service delivery protests increased from R800 million in 2017/18 to more than R1.7 billion in 2018/19. The company has partnered with Santam and SALGA on the Partnership for Risk and Resilience (P4RR) programme.
The National Disaster Management Centre categorises municipalities into three groups according to their disaster management capabilities: well functioning, functioning but vulnerable, or dysfunctional. Drawing from this data, the P4RR programme targets 53 municipalities in the second category. The programme has five focus areas: to drive community risk awareness; to build and increase the capacity for disaster response and relief; data mapping; exploring and providing alternative energy sources; and identifying fire hotspots. Not all focus areas are implemented in all municipalities.
A key priority of this programme is to be inclusive, multi-stakeholder and community driven. To achieve this, all disaster risk reduction projects are designed around the needs and priorities of communities, often as articulated in their Integrated Development Plans, creating conducive environments for strategic cross-sector partnerships that draw on the expertise of local government disaster response units, non-profit organisations and intermediaries.
2. Improving municipal capacity
Anglo American Platinum and the Development Bank of Southern Africa (DBSA) partnered on the Municipal Capacity Development Programme in 2014 to improve the functionality of 11 municipalities in mining communities across five provinces, by supporting skills transfer, systems development, processes and plans that promote stability, and improved opportunities for economic development in municipalities.
The mining company invested R120 million in the programme over a three-year period, during which time, according to DBSA, there was improvement in the provision of electricity and water in four municipalities and an overall improvement in revenue collection. During the three-year period, 2 506 water meters and 407 electricity meters were replaced; 26 infrastructure plans were completed; 500 municipal officials were trained in areas such as water and electricity meter replacements, pothole repairs, meter physical verification, operations and maintenance, budgeting and planning, as well as call centre management; and 205 working opportunities were created. A total of 58 small businesses are estimated to have benefited from the programme.
3. Unlocking community talent and creating employment opportunities
Kagiso Trust is on an ambitious mission to change communities from the ‘bottom up’. The trust recently launched capacity- building projects in six municipalities across the country, emphasising the need for local municipalities to collaborate with their communities while taking ownership of existing issues to find practical and sustainable solutions. Through a civil society approach, these interventions aim to create better results in education, entrepreneurship and skills building, while shifting the economic climate of unemployment.
The programme includes municipal internships that provide opportunities for local youth to gain practical experience and technical skills, as well as procurement strategies that grow and improve local buying power. By tapping into local skills, facilitating in-depth training that fosters proper management, and ensuring communication between the community and municipal leadership, these interventions have the capacity to decrease corruption and unlock the full potential of local municipalities.
Enhancing citizen engagement
Active and engaged citizenry is critical for compelling municipal improvement. Corporate interventions can include public education programmes that inform communities about their residential rights and empower them to access, monitor and report local government services. Companies can also support local government to run community consultation and feedback sessions as ongoing communication platforms that provide distinct alternatives to service delivery protests.
In 2016 the Department of Cooperative Governance and Traditional Affairs introduced the GovChat website through which citizens can communicate with their local government and, in 2018, a WhatsApp version of the platform was also introduced. The Johannesburg Roads Agency (JRA) launched the Find and Fix mobile application in 2014 to improve its reachability and customer service. The app enables road users to photograph, register the location and notify the JRA of potholes, missing manhole covers, defective traffic signals and other related infrastructural faults. In 2017 National Treasury initiated Municipal Money – a website to keep citizens informed about local government’s financial performance and health, holding municipalities accountable by fostering greater transparency. The tool also allows municipalities to be compared to one another. Companies – particularly in the business of ICT – can play a key role in helping government to ensure innovative stakeholder communication and monitoring solutions such as these.
Aside from ensuring a functioning environment in which companies can operate, strengthening municipalities can have significant social benefits. Ensuring access to reliable service delivery and job opportunities where people live will help to address rapid urbanisation and facilitate more equitable growth of urban, peri- urban and rural communities.
