Treasury rules to end municipal splurges will be tested by culture of entitlement

As last week’s GDP figures made abundantly clear SA’s economy is in extremely poor shape and the fiscus is in an especially difficult position. It needs to somehow do more with less; stimulate the real economy with productive spending but within tighter budget constraints.

Local government is also in a tight spot. Politicians will want to deliver more and better services to increasingly picky voters in the run-up to the 2021 local government elections. But it needs to do this credibly; overcoming the stench of corruption as the Hawks swoop on a number of SA’s municipalities including one of its biggest eThekwini.

One way in which these objectives can be accomplished is by spending more carefully and scrupulously. Last week the Treasury published its much anticipated municipal cost containment regulations which will come into force almost immediately from July 1.

The regulations aim “to ensure that resources of a municipality ... are used effectively efficiently and economically by implementing cost containment measures” and will apply to all officials and political office bearers. 

They put limits on the use of consultants the purchase of vehicles for politicians and spending on travel and accommodation. They also ban the use of credit cards by local officials and councillors and severely limit spending on sponsorships events and catering as well as media conferences meetings and study tours.

It is not difficult to understand why these items were chosen specifically by the Treasury — their quite outrageous abuse by local officials and councillors is well-known. The question is will these regulations be able to apply the brakes to the culture of bling spending in municipalities or will they be brazenly disregarded?

To understand why cost containment regulations are necessary to reel in dodgy expenditure in municipalities consider for a second that the auditor-general’s (AG’s) 2016/2017 local government report showed irregular expenditure at R28.4bn up from R16.2bn in the previous year and that R13bn of this figure was for the one year alone (2016/2017).  It’s expected that soon-to-be-released AG figures for 2018 will be equally worrying.

Consider just one example of the abuse that has necessitated these regulations. In two days in 2018 R90000 was spent on KFC (Kentucky Fried Chicken) by the municipal manager of the Enoch Mgijima municipality in the Eastern Cape where the mayor spent R300000 on a public relations event trying to spin the public image of the council while being driven around in a rented Volvo SUV costing R78000 a month when the official vehicle was in for repairs for six months. 

The same municipality where effluent runs freely on the streets and refuse lies uncollected was so cash-strapped in 2018 that it was compelled by a court order to auction off assets including refuse removal trucks and earthmoving equipment to pay its creditors.

Such stories of abuse of resources abound in local government and there is no doubt they fuel discontent among residents of municipalities across the country and in a number of cases would have led directly to service delivery protests. 

The regulations should immediately end the most base and outrageous of such abuses: the credit card used to buy the KFC will be no more — credit cards for officials and councillors are to be banned; the cost of the ridiculously expensive SUV speeding down the dusty pot-holed municipal road will be capped at R700000; the entertainment allowance justifying expensive meals and abused far and wide will be capped at R2000; and the days of officials and councillors having a drink at taxpayers expense has also been banned.

The use and remuneration of consultants — a key conduit for corruption — is curbed with fees limited to those set in guidelines by the AG department of public service & administration and professional bodies; and contracts specifying penalty clauses for poor performance.

Travel and accommodation expenditure has been tightened up with the regulations specifying no business class travel for trips shorter than five hours use of public transport or shuttles if these cost less than car rentals and no overnight accommodation for trips of fewer than 250km. 

Catering can only be provided for meetings longer than five hours if authorised by the accounting officer and the municipality cannot pay for any social events team-building exercises year-end functions sporting events or budget vote dinners. Nor may municipal resources be used to fund political activities “including the provision of food clothing [or] printing”.

The regulations are detailed and provide both the clarity and threatened severity that should scare most (reasonably) honest local officials and councillors into much more limited spending especially on items such as allowances that in the past may have included some personal gain or freebie with those failing to comply set to be held liable for financial misconduct or a financial offence.

The real test though will be whether the regulations can change the institutional culture of (mis)spending in municipalities especially among top officials and councillors many of whom seem to think it is their due to spend scarce municipal resources in quite outrageously extravagant ways on vehicles entertainment and travel junkets just the thought of which would leave most normal folk shamefaced.

In expectation of any potential pushback by the worst of local officials and councillors the Treasury has specified that each municipality must provide its own cost containment policy with consequences for nonadherence to be adopted by the council as part of its budget policy and reviewed annually. The policy must be released to the public on every municipality’s website.  Reporting by municipalities must be institutionalised. The municipality must detail measures in its in-year reporting as well as its annual report and quarterly reports must be submitted to the council as well as the Treasury. 

Ultimately though the real test is going to be whether the Treasury and to some extent the department of co-operative governance & traditional affairs have the political will and appetite to enforce the cost-cutting regulations and probably drag one or more of the worst offenders to court. Neither minister Tito Mboweni nor Nkosazana Dlamini-Zuma are known for being faint-hearted and may present just the sort of leadership that is required.

For most long-suffering municipal residents such a set of measures would be welcomed and for the battered fiscus it is an economic imperative in tough times.