Material financial losses across 176 municipalities estimated at R5.19 billion

Note to editors: Please find attached soundbite by Jacques Smalle MP

The Auditor General of South Africa (AGSA) this week released a report into the Material Irregularities (MIs) in Local Government. This addressed amongst others, the non-compliance with or contravention of legislation, fraud and theft resulting in a material financial loss, and the misuse or loss of a material public resource for the 2021/22 financial year.

The audit, covering 176 municipalities, has highlighted a systemic failure in local government by various role players to hold public servants accountable for serious financial maladministration.

Material Irregularities are defined as “Any non-compliance with, or contravention of, legislation, fraud, theft or a breach of a fiduciary duty identified during an audit performed under the Public Audit Act that resulted in or is likely to result in a material financial loss, the misuse or loss of a material public resource, or substantial harm to a public sector institution or the general public.”

The AGSA reported that more than five billion rand in financial losses were accrued across various municipalities of which less than two hundred million rand has been recovered.

North West was responsible for the highest number of MIs at 46 and also the slowest to respond to them. Free State, KwaZulu Natal, Eastern Cape were also high with 42 MIs each.

Thirteen Municipalities invested more than one and a half billion rand VBS of which less than ten percent was recovered through the liquidation process. To date only a handful of officials have been charged and mayors and senior ANC cadres are yet to be held accountable.

Municipalities do not function in isolation and therefore it will be prudent for Chapter 9 institutions to issue a certificate of debt against transgressors who have been responsible for significant financial harm to the institutions they were supposed to manage.

The DA calls on the Minister to tighten consequence management mechanisms and improve systems that monitor financial accountability, financial recovery, prevent financial irregularities and improve accountability.

The inability of municipal councils or accounting officers to act, jeopardises the possibility of recovering lost funds, addressing the impact of financial mismanagement, and holding to account responsible officials and/or implicated suppliers.