(Published in Grocott’s Mail June 26 2012)
Grahamstown is not alone in South Africa in having a big divide between rich and poor. However, unlike some other towns and cities where Apartheid managed to shove the poor into far-flung townships, poverty and inequality are a bit more obvious here. I saw an Audi TT overtake one of our donkey carts plodding alongside the N2 just outside the city a while back and the symbolism was just too palpable.
However, money not only separates us it also unites us and it does so through the Makana municipality, of which Grahamstown is the major part. Rich and poor rely on municipal services like waste collection, electricity, roads and sewage and all but the poorest pay for them, at least in part, through municipal tax.
We should all, then, be attentive to what happens to the money that flows into the municipal coffers and how it is spent. It is in all our own interest to see that the money is spent properly and collected fairly.
Weakness in municipal finances represents a serious threat to our stability in South Africa. According to the 2011 SA Reconciliation Barometer survey, South Africans have the least confidence in local government of all the three spheres of government, local, provincial and national. Not all the violent protests we’ve seen in recent years may be solely or always driven by a lack of “service delivery”, but it is commonly the flashpoint.
The Auditor General earlier this year reported that only 6% of South Africa’s 302 municipalities and municipal entities audited had received completely clean audits from his office, though a further 51% fell into the next best category of “qualified with findings”. That means that 43% were in the bad category of “qualified, adverse or disclaimed”.
The National Treasury’s 2011 Local Government Budgets and Expenditure Review explains: “Where audit outcomes are adverse, disclaimed or qualified it indicates that fundamental principles of good governance, transparency and financial management are not being adhered to.”
So what do we do? The mayor presented the municipal budget recently, and it seems a reasonable plan, but it’s on paper. Monitoring what gets spent and how depends on you, the citizens, as much as on the local Press, the National Treasury and the Auditor General.
The Treasury’s 2011 Review goes further: “The revenue-service link between municipalities and residents is key to fostering greater accountability. This suggests that requiring poor households to pay even very small amounts for services may deepen local democracy and municipal accountability.”
While we must do our part to ensure the municipality lives up to its promises, we do depend on the Auditor General to inform us about how well or badly the municipality manages our money. And the AG’s report on Makana’s finances for 2010-2011 year (and the 2009-2010 year for that matter), shows that the municipality’s control of its finances has been poor.
For both years now the municipality’s financial statements received from the Auditor General a “disclaimer of opinion”. In the 2008-09 it was an “adverse opinion”.
A disclaimer is quite a strong signal that all is not right with the accounts. It’s no solace that Makana is not alone, and was one of 58 municipalities in the 2010-11 financial year that received a disclaimer, five more than last year. So what’s the problem?
The auditor’s report as a whole is a strong reproof to the municipal management.
This is plain though its carefully worded report simply states that amounts could not be verified or in the language of accountants’ “the municipality could not provide sufficient appropriate evidence” for, by way of example, “Existence of debtors amounting to R16-million.”
The auditor identified unauthorised spending of around R48-million – which the municipality should have picked up and didn’t – and there was “irregular” spending of around R11-million and R2.4-million in “fruitless and wasteful” spending, some of which the municipality did identify.
The report is particularly critical of “supply chain management” or bids and tenders. In almost all areas it seems it is not complying with the relevant laws. In some cases allegations of criminal irregularities have been referred to the police.
“Effective leadership based on ethical business practices and good governance, protecting and enhancing the municipality was not demonstrated by top management,” is the understatement typical of such reports.
The really worrying thing, though, is that Makana underspent its capital budget by 28%, spending only R70-million of R97-million allocated for acquiring or upgrading physical assets. This meant that it did not spend R27-million that could have gone towards materially improving the lives of Makana citizens. The result we can all see in badly maintained or no roads, the persistence of the bucket system, and problems with clean water supply among other things.
In accountants’ language, the auditor notes, “The underspending had a negative impact on the municipality achieving its service delivery mandate.” In non-accountant language, why aren’t Makana residents blocking roads and burning tyres?