AG’s findings show the good, bad and downright ugly in Vhembe’s municipalities

Date: 07 September 2024 By: Anton van Zyl

The Vhembe District may not have the worst municipalities in the country, but they fall short of expectations, especially considering the millions spent on consultants and special initiatives aimed at improving financial accounting standards. Last year, the amounts spent by local municipalities on unauthorised, irregular, fruitless, and wasteful expenditure reached nearly R800 million, with seemingly no consequences for the officials and politicians involved.

Two weeks ago, the auditor-general (AG), Ms Tsakani Maluleke, released the 2022/23 audit outcomes and briefed the Portfolio Committee on Cooperative Governance and Traditional Affairs (COGTA). Although some improvements were noted, the overall picture painted was one of badly managed municipalities, which threatens service delivery.

The audit results, available on the AG’s website, provide a clear indication of the progress - or often lack thereof - across 110 municipalities nationwide. The Vhembe District Municipality (VDM), along with the four local municipalities in the district, showed moderate improvements, but numerous alarm bells are still ringing.

In the 2022/23 financial year, only the VDM received a qualified audit. This indicates numerous material misstatements, forcing the AG to make estimations to determine where funds were spent. The four municipalities - Makhado, Thulamela, Musina, and Collins Chabane - all received unqualified reports, with some findings.

The Vhembe District Municipality (VDM), along with the four local municipalities in the district, showed moderate improvements, but numerous alarm bells are still ringing.

Irregular, unauthorised, and fruitless expenditure

The municipalities’ inability - or perhaps even unwillingness - to adhere to treasury guidelines and legislation remains a significant concern. The biggest culprit in Vhembe is the Musina Municipality. This small municipality, with a reported total income of R753 million, spent R293.6 million (38.9%) of its funds in an unauthorised or irregular manner, or on fruitless and wasteful expenditure. According to the AG’s report, R118.2 million was spent on unauthorised expenses, while R122.8 million was irregularly spent, and R52.6 million is described as fruitless and wasteful expenditure.

The district municipality, VDM, also has a long history of unauthorised spending. In 2020/21, the municipality recorded a staggering R1.4 billion of unauthorised spending. That same year, the VDM also reported irregular expenditure of R140.6 million. The situation improved slightly in 2022/23, with unauthorised expenditure standing at R222.6 million and irregular expenditure dropping all the way to R37,375.

VDM’s spending patterns are extremely concerning, as in 2020/21, the combined total of the unauthorised, irregular, and fruitless or wasteful expenditure stood at R1.54 billion. Last year, the VDM received R1.9 billion in grant funding, which means that in 2020/21, the bulk of the expenditure was conducted without adhering to treasury regulations or applicable legislation.

Collins Chabane Municipality is also problematic regarding proper procurement processes. In 2022/23, this municipality reported unauthorised expenditure of R209.4 million - an increase from the R141.1 million the previous year, though still less than the R273.1 million reported in 2020/21.

How stable are the local municipalities?

Surprisingly, all of the municipalities in Vhembe have money in the bank, and their assets exceed their liabilities. However, most are notoriously bad at collecting debt, and many do not pay their suppliers within 30 days.

The worst collector of revenue appears to be Vhembe, with the AG estimating that 96% of its debt cannot be recovered. Thulamela is not far behind, with 95% of debt deemed unrecoverable. Musina seems to be the best, with only 53% of its debt in the “red” zone.

At Collins Chabane, “bad debt” stands at 79%, and the municipality takes an average of 350 days (almost a year) to collect debt. The time it takes for Thulamela to collect debt is not even indicated, which probably means the municipality does not bother to do so. Makhado takes an average of 80 days to collect debt, and VDM takes 38 days. This raises questions about what debt VDM collects, since this constitutes only 4% of the accounts.

For suppliers, the worst municipality to deal with is Musina, which takes an average of 208 days to pay its bills. One can assume that salary bills are not included in this calculation as Musina also has the dubious reputation of having some of the best-paid officials in the province, despite its poor financial performance.

The second-worst municipality to deal with is VDM, which takes an average of 123 days to pay accounts. By far the best municipality for suppliers is Thulamela, which takes only 25 days to settle bills.

Municipalities not shy to ask (and pay) for help

The AG has previously criticised municipalities for their reliance on expensive consultants, often contracting out work that should be done by their own staff members.

Collins Chabane is the star (mis)performer in this category, spending R29.9 million in 2022/23 on consultants. Makhado Municipality also struggles with relying on outside experts, spending R9.8 million on consultants. The least reliant on consultants is Thulamela, which spent only R2 million on such experts.

One reason often cited for using consultants is a lack of expertise and specialist knowledge, especially in finance departments. Makhado Municipality reported a 38.5% vacancy rate in its finance department, with only 61% of its posts filled.

Collins Chabane has filled only 54% of the available posts, with a vacancy rate of 31.8% in its finance department. The “worst” municipality for filling posts in its finance department is Musina, with only 49% of the posts filled in the 2022/23 financial year.

On a positive note, the internal control assessment of at least two of the municipalities is improving. Makhado and Thulamela received a “good” rating, while the other three had to settle for a “concerning” rating.

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Anton van Zyl

Anton van Zyl has been with the Zoutpansberger and Limpopo Mirror since 1990. He graduated from the Rand Afrikaans University (now University of Johannesburg) and obtained a BA Communications degree. He is a founder member of the Association of Independent Publishers.

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