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Three Eastern Cape municipalities painted a bleak picture of their finances before the provincial legislature on Tuesday, revealing mounting debt, poor revenue collection, bloated salary bills, stagnant audit outcomes and millions of rand owed to them by employees and councillors.
The financial health of the Chris Hani District, Port St Johns and Enoch Mgijima municipalities came under scrutiny during a meeting of the Eastern Cape legislature’s portfolio committee on co-operative governance and traditional affairs (Cogta), following a briefing by the auditor-general on local government audit outcomes.
Cogta MEC Zolile Williams said municipalities across the province were owed about R54bn by residents, businesses and government departments, warning that no institution could function properly without collecting revenue.
“I’m not happy about the audit outcomes,” Williams said.
“You’ve seen Chris Hani District has stagnated on a qualified audit opinion.
“That is clearly unacceptable. It means no-one cares about improving the audit outcomes.”
The Port St Johns municipality told the committee that employee-related costs had remained above the National Treasury’s recommended 40% benchmark since 2021/2022, placing continued pressure on its finances.
Acting municipal manager Mandisi Ngxekana said overtime, allowances and unresolved salary disparities continued to drive the salary bill, while the municipality also had to repay a R29m Sars debt after successfully reducing an initial assessment of R67m.
The municipality also disclosed that employees owed it nearly R90,000 and acknowledged that it had received qualified audit opinions for four consecutive financial years.
“These audit outcomes highlight the need to strengthen financial management, internal controls and compliance to achieve improved audit outcomes,” Ngxekana said.
The Chris Hani District Municipality attributed its financial challenges to a limited revenue base, high unemployment, poor debt collection and a culture of non-payment.
Municipal manager Gcobami Mashiyi said the municipality had collected R1.39bn against a budget of R1.81bn, while creditors stood at R131.9m, including R106.7m owed to the department of water and sanitation.
Mashiyi said three service providers had been appointed to assist with debt collection across the district.
He said the municipality had significantly reduced its reliance on consultants, budgeting less than R1m for consultant services during the current financial year.
The Enoch Mgijima municipality said it remained under severe financial strain despite signs of administrative stabilisation.
Acting municipal manager Apiwe Mkhangelwa said the municipality had operated with an unfunded budget for five consecutive years and recorded creditors of R2.05bn, of which Eskom accounted for more than R2.03bn.
He said the municipality’s debtors’ book stood at R1.93bn, with about R780m made up of historic interest, while councillors and employees owed the municipality more than R3.3m.
Mkhangelwa said irregular expenditure had declined from R208.9m to R128.6m over the past financial year, though the municipality still spent R16.1m on specialist consultants.
Portfolio committee chair Nomasikizi Konza said members were concerned that many municipalities continued to record stagnant audit outcomes despite receiving support from the government.
She said committees established to investigate irregular, fruitless and wasteful expenditure were often failing to perform their oversight role.
“We are not impressed by the stagnant audit outcomes,” Konza said.
The committee would compile recommendations for the legislature, including possible interventions to improve governance and financial management where necessary.
Williams also expressed concern over the Port St Johns municipality’s salary bill, saying employee costs had reached 51% of expenditure.
“Sooner rather than later that municipality will face cash-flow challenges,” he warned.
He said poor audit outcomes ultimately reflected poor service delivery, saying municipalities had a responsibility to improve governance while ensuring residents received value for the rates and taxes they paid.
Daily Dispatch
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