AT LEAST nine KwaZulu-Natal municipalities, were in distress with issues of governance and financial instability, Co-operative Governance and Traditional Affairs (Cogta) MEC Sipho Hlomuka has revealed.
This comes in the wake of an independent report that showed the financial state of the province’s local municipalities was on a downward spiral, over a five-year period.
With the added economic harm caused by Covid-19 expected to take its toll on municipal financial stability, the devastating impact of this downward trend on citizens is expected to be felt in about a year’s time, according to the latest Municipal Financial Sustainability Index (MFSI).
The index analysed performance over the period from 2015 until the end of the 2018/2019 local government fiscal year.
Delivering Cogta’s budget policy speech on Friday, Hlomuka said 21 municipalities were identified as distressed in 2019. Of the 21 municipalities which received support from Cogta, eight remained in distress during 2020/2021, namely eThekwini metro, Ugu district, uMgungundlovu district, Umngeni, Amajuba district, Newcastle, eDumbe and uMkhanyakude district.
In addition uMshwathi, Umzimkhulu and Jozini were targeted for close monitoring since they regressed to qualified audits for the first time in the 2018/2019 audit year while Zululand, Nquthu and Umdoni were identified as being in distress.
However Hlomuka said some municipalities had seen marked improvement including eThekwini metro, uMgungundlovu district, uMshwathi, Umzimkhulu and Jozini.
“Close monitoring continues in the remaining municipalities as well as in municipalities under intervention.”
Hlomuka said nine municipalities were currently under intervention in terms of Section 139 (1)(b) of the Constitution, which provides for the MEC’s intervention in the financial and administrative affairs of the municipality, through an appointed administrator.
Those were Mpofana, Msunduzi, Richmond, uThukela District, Inkosi Langalibalele, uMzinyathi District, Mtubatuba, eMadlangeni and Abaqulusi municipalities. “Most recently, in February 2021, two other municipalities were placed under administration, namely Nquthu and uMkhanyakude District,” said Hlomuka.
Produced by the Ratings Afrika agency, the MFSI said that, with the exception of local municipalities in the Western Cape (WC) – which showed an upward trend and had scored higher points – the 100 biggest local authorities across the country showed a consistent decline in performance.
In KZN, the Newcastle Municipality was the leading underperformer, while KwaDukuza was the only one that did better in the period under review, according to the report.
While the average score for WC was placed at 59, KZN ranked 52 – with the lowest being local authorities in the North West and Free State provinces, where average scores were 25 and 21 respectively.
“WC is the only province that scored above 50 and the only one with municipalities that had improved,” the survey found.
The MFSI was a scoring model that evaluated operating performance, liquidity management, debt performance, budget practices, affordability and infrastructure development, said Leon Claassen, an analyst with the agency, who added the scores were made out of 100.
The entity defined financial sustainability as “the financial ability to deliver services, and develop and maintain the infrastructure required by its residents, without unplanned increases in rates and taxes or a reduction in the level of service”.
Newcastle Municipality spokesperson Mlu Khumalo said the municipality was aware of the report but had dismissed it as unfounded as it was not clear how the findings were arrived at.
Local government expert Lionel Pienaar said the report presented an accurate picture of the situation in most municipalities.
“Unless the government makes some serious governance decisions, the situation would deteriorate further.
“There needs to be a clear distinction between state and party, in terms of how municipalities are administered,” said Pienaar, a retired former deputy director-general in the KZN Cogta department.