24 of 39 E Cape municipalities in ‘dire distress’

More than half of the province’s 39 municipalities are in dire financial distress. Some have liabilities exceeding their entire budgets for 2017-18.

This shocking news was revealed by Eastern Cape auditorgeneral Sithembele Pieters in a media briefing on Wednesday.

“We are concerned about the financial sustainability of 24 municipalities,” Pieters said.

On June 30 last year, four had Eskom debts totalling R303m.

All but one district municipality – Sarah Baartman – are on the list of 24. Local municipalities on it include Great Kei, Mnquma, Makana, Mbhashe, Emalahleni, Kouga, Ngqushwa and Joe Gqabi.

Pieters is deeply concerned about the three new municipalities, Enoch Mgijima, Walter Sisulu and Raymond Mhlaba, formed through mergers of smaller municipalities. All three received disclaimers, as did Mnquma. “The disregard of our warning signals was most noticeable at Mnquma, where there was a collapse in oversight and governance accompanied by a breakdown in internal controls caused by leadership in conflict with itself.”

In the Eastern Cape seven municipalities regressed and six improved. “We are not necessarily the worst; it’s just that we are stagnant. Our best-performing municipalities are Ingquza Hill and Sengqu. This is because they are consistently complying with the laws and regulations and properly report their finances,” he said.

Pieters revealed that Eastern Cape municipalities incurred R23bn in irregular expenditure in 2016-17.

Breaking down the figures, he said R13.6bn in cumulative irregular expenditure was incurred and disclosed.

The R23bn consists of the R13.6bn incurred provincially in 2016-17 financial year and R9.4bn in irregular expenditure which was brought forward from the prior period.

“This is money that was neither written off after investigation nor recovered, as required by legislation. Furthermore we could not find evidence that 49% of the municipalities investigated and followed up the irregular expenditure incurred by them in previous years,” he said.

The biggest offender by far in irregular expenditure is Nelson Mandela Metro with R8.2bn. It is trailed at a distance by OR Tambo DM at R3.1bn and BCM with just over R584m.

Contracts worth R4.6bn were awarded irregularly, and in contravention of legislation.

BCM received an unqualified audit with no findings – an improvement from the qualified audit with findings in 2016-16. The NMB received a qualified audit with findings, as it di 2016-17 financial year.