Continuous budget cuts have created service delivery challenges for municipalities, says finance minister Enoch Godongwana.

The minister made the remark while addressing delegates during a panel discussion at the two-day 2022 Local Government Summit at the Birchwood Conference Centre in Boksburg on Tuesday.

The panellists deliberated on instability in councils/coalitions; the local government system and its impact on a developmental local government; poor audit outcomes and how to reverse negative findings; improving the retention of experienced councillors and continuity across elections, gender representation and participation.

They also discussed policies addressing differentiated context across municipalities regarding legislative compliance; community-based monitoring; collaborative monitoring and support, the role of the chairperson of the Municipal Public Accounts Committees (MPAC); strengthening committee oversight, and enforcement of the code of conduct.

Budget cuts, said Godongwana, have created various problems, with an issue of serious concern being the worrying tendency to shift functions to local government.

Governance in numerous councils in the country, the minister said, is a “serious challenge”. He said what complicates matters in this regard is the lack of understanding about the interface between political offices and the administration.

“That distinction sometimes is blurred. In effect, it undermines governance in municipalities. What is the effect of that? Government failure, financial crisis,” he said.

As it is, 43 municipalities are in the “intensive care unit”, said the minister.

He said part of the discussion that the summit should have is an extensive engagement at the political administration interface, which he said impacts on governance, including financial management.

“The starting point in financial management is when [council] sits and decides to approve an unfunded budget. When you approve an unfunded budget, by choice, you’ve made a decision that you’re going to spend money you don’t have,” he said.

Currently, there are 175 municipalities with unfunded budgets.

The net effect of unfunded budgets, the minister said, is poor service delivery, which government can ill afford.

To overcome the challenges, Godongwana said the government has to achieve six principles. These are an active citizenry, professionalisation of the public service, improving the integrity and credibility of the public procurement system, improving the integrity and credibility of the public procurement system, specifying targeted economic sectors vulnerable to corruption and unethical practices, and effective risk identification and management systems.

“Those are some of the principles we need to strengthen as government,” he said.

Auditor-general Tsakani Maluleke, who was also a panelist on the topic, echoed the minister’s sentiments. She said it is “quite clear” that the service delivery experiences of citizens across the country “does not meet our constitutional promise”.

The consolidated general report on the local government audit outcomes for the 2020/21 financial year, which Maluleke released in July, paint a gloomy state of affairs.

During this period, 25 municipalities received disclaimed audit opinions – the worst audit opinion possible.

On the positive side, 27 municipalities maintained a clean audit status, while 14 achieved a clean audit for the first time. Six lost their clean audit status. During this period, 100 municipalities received unqualified (credible) audit opinions.

“Financial management is in deep trouble in municipalities. If we, the AGSA, stopped auditing at the first submitted financial statements, we would have ended up with not 141 (unqualified audits), but 62. What that tells you is that 75% of municipalities are unable to present credible financial statements,” she said.

She said it is good that the AGSA assists, “but it’s worrying that even after all of these years of helping, we’re not getting financial management practices right”.

Combined, municipalities spent R1.2 billion on consultants preparing financial statements.

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