Time is ticking for shady officials in badly run and shoddy municipalities

As pressure is brought to bear to root out endemic corruption and maladministration in SA’s state-owned entities (SOEs) and to call to account those responsible a key issue is how to hold those entrusted with responsibility in these organisations accountable.

All too often officials and politicians are able to shrug off accusations of poor governance incompetence and on occasion outright criminality. Indeed enforcing accountability seems sorely lacking across all spheres of government. But nowhere is this truer than in local government.

Earlier this year Astral Foods reached an out-of-court settlement with Eskom that will allow the company to bypass its local municipality – Lekwa – and settle its electricity bill directly with the electricity supplier. In so doing Astral is able to stabilise its substantial operations in Standerton including investments in animal feed and poultry operations which are worth in excess of R3bn and provide employment for 4150 people.

Similar agreements have been made with Cofco and Standerton Oil Mills two other large companies with operations in the municipality. This quite astounding precedent has become necessary because since 2011 Lekwa has become so tardy in settling with Eskom for bulk electricity supply that as of the end of March more than R300m was owed for bulk power of which almost 90% was over 90 days.

Aside from the ignominy of a municipal council being all but ignored while its largest ratepayer (representing more than 50% of its rates base) negotiates and wins the right to pay Eskom directly a number of immediate questions spring to mind.

First what does Lekwa do with the R7m to R10m Astral pays it every month? Second how on earth is Lekwa able to run up its bulk electricity bill so recklessly?

The short answers to these questions are first it diverts this money (which should be passed on to Eskom) into its questionably planned operating expenses which have become reliant on sucking up utility fees. And second it gets away with it because no one appears to hold the Lekwa municipality accountable for its actions.

Ironically and it seems obliviously Lekwa’s vision statement is "to be the leading people-centred municipality excelling in economic growth development and governance" — and it has an entire local economic development division within its development and planning department. One wonders how the staff of this division occupy their time – it is certainly not with ensuring co-operation with major stakeholders in the municipality such as Astral.

The situation is not unique to Lekwa. In January 2017 eight companies with extensive industrial operations in Madibeng including Bridgestone and Bosch went to court to stop Eskom from cutting off electricity to the municipality and thereby disrupting their operations. One would imagine it’s only a matter of time before these companies also negotiate separate payment agreements bypassing the municipality.

For Lekwa and Madibeng this solution is not only an indictment of their financial management but also a potential threat to leveraging electricity tariffs as a source of cross-subsidy or revenue-raising for infrastructure maintenance.

These two municipalities have made it onto the Treasury’s list of municipalities in financial distress due among other things to falling cash balances and concerns about poor debtor and creditor management.

These municipalities are not of course unique in facing such challenges.

 

Indeed a third of all municipalities are on the Treasury list. The auditor-general’s recently released local government audit outcomes put the number of financially distressed municipalities even higher rating the financial health of almost two-thirds as either a matter of concern or needing intervention — up 5% from the previous financial year.

The Treasury’s State of Local Government Finances and Financial Management report identifies a number of significant financial management challenges in municipalities.

The most pressing issues include the number of acting municipal managers and chief financial officers an increase in poor cash flow management an increase in reliance on conditional grants low capital spending on infrastructure increases in debtors and creditors inadequate provision for repairs and maintenance a lack of credible budgeting and ineffective governance structures undermining the administration of municipalities.

While the Treasury and the auditor-general can highlight poor performance through their reporting mechanisms it is primarily provincial government that is responsible for holding local municipalities accountable in situations of financial incompetence and crisis by intervening when a municipality is unable to meet its obligations (in terms of section 139 of the Constitution) and appointing an administrator to run things.

Most provincial ministers of co-operative governance would one would imagine be rightly loath to place a municipality under section 139 administration since to do so would be an admission of failure but use of the mechanism is frustratingly rare and varies greatly by province.

There is also speculation that the section 139 administration mechanism is used as a political tool to neutralise or remove political competitors or factions. Indeed a degree of scepticism over the use of this ultimate enforcer of accountability could be forgiven. It wouldn’t be difficult to argue that all the municipalities on the Treasury’s distress list should be placed under administration but only 10 are under administration.

In December 2016 a spokesperson for the Limpopo provincial government announced that six of its municipalities were on the verge of financial collapse and needed urgent bail-outs. These included Vhembe Mopani and Sekhukhune district municipalities as well as Bela Bela Musina and the newly established LIM368. Two months earlier the provincial government bailed out Thabazimbi after cash dried up and the sheriff started attaching assets. None of these municipalities except the DA coalition-led Thabazimbi is under administration.

Consider too Matjhabeng in the Free State which owes Eskom almost R600m in addition to R1.1bn for bulk water. By our measurement Matjhabeng has one of the worst audit records in the country – consistently receiving either a disclaimer or an adverse finding over the past decade. In 2013 municipal manager Benny Malakoane and mayor Mathabo Leeto were arrested on charges relating to a multimillion-rand fraud and racketeering ring irregular tender processes and the abuse of public funds.

Not only is Matjhabeng not under administration but Malakoane and Leeto were promoted to ministers in the Free State cabinet with the municipality unbelievably still paying their legal fees.

So where does the buck stop? The auditor-general Kimi Makwetu remarked in his most recent report on local government that "accountability means that those performing actions or making decisions are answerable for them but also that there should be consequences for transgressions lack of action and poor performance".

One could be forgiven for asking how it is that those in charge – councillors and officials – of Lekwa Madibeng the collapsing municipalities in North West Matjhabeng and or a large number of other dysfunctional municipalities keep their jobs. Such levels of utter incompetence (and at times corruption) in any other sector would be dealt with harshly but termination of employment seldom happens in local government.

Local officials are responsible to local councillors who are in turn answerable to local and provincial party structures.

The reality on the ground is that there is still huge overlap at party level between these different role players and there is very little appetite to fire senior officials or remove councillors and by so doing upset the fine political balance in numerous cases.

While the hard-fought-for 2011 Municipal Systems Amendment Act (the "cadre" act) has gone a long way towards separating political and administrative roles for local role players since local officials can no longer hold political office the political will to hold local officials and councillors to account is still for the most part sorely lacking.

However an assumption by those in power — regionally provincially and perhaps nationally — that local people will simply accept continuing poor performance by councillors and officials can no longer be made. Support for the dominant political order – the ANC – is on the wane across SA (nationally dropping more than 10% between the last two local elections). In Lekwa ANC support has dropped by almost 12 percentage points in Madibeng by more than 20 points and across North West by more than 15 points.

And between elections anger with local government is on the rise. Municipal IQ data show the number of service delivery protests in the country increased sharply in 2012 and remains high with May 2017 having the highest monthly tally ever.

Poorly run municipalities such as Lekwa Madibeng and Matjhabeng are perennial protest sites although there isn’t always a clear link between performance and protests – many well-run municipalities also experience protests as residents compete for resources and the attention of councillors and officials.

Change is coming to local government and the time of local officials and councillors simply shrugging off criticism of incompetence and corruption is likely to come to an end sooner rather than later. If provincial officials are unwilling to step in it seems a more savvy and critical local electorate will.