South Africa: North West Treasury on municipalities in financial difficulty

Provincial Treasury engages municipalities on analysis feedback

MEC for Finance Motlalepula Rosho, Head of Department, Mr. Ndlela Kunene and Chief Municipality Support Program Director, Ms. Linda Nengovhela have initiated a feedback process to financially challenged municipalities.

The feedback analysis is the result of a five-year (2015/2020) assessment of provincial municipalities by the Provincial Treasury in accordance with the provisions of Articles 138 and 140 of the Municipal Financial Management Act to determine whether a municipality is in serious material breach of its financial commitments.

The analysis of reactions to three municipalities (Dr. Ruth Segomotsi Mompati, Naledi and Maquassi Hills) was done through a virtual link and was in preparation for the implementation of Chapter 13 of the MFMA to help municipalities solve their problems financial.

Based on the results of the assessment, thirteen (13) of the province’s 22 municipalities are said to be in dire financial straits and as a result, service delivery is on the brink of collapse.

“The results of the municipal audit show that more than half of the financial systems and financial and governance information of municipalities are deficient. These widespread weaknesses make municipalities vulnerable to financial mismanagement which subsequently turns into a crisis. where no corrective action is put in place. Continued tolerance for chronic and serious financial problems undermines public and investor confidence. It also undermines the ability of the municipality to fulfill its basic functions and provide residential and business services,” says MEC Rosho.

She conceded that although the Provincial Treasury is doing its best to provide support to the municipalities, the support has not yielded any desired results. However, the province has seen a marginal improvement in the financial performance of the supported municipalities.

She pointed out that other challenges facing provincial municipalities include bloated structure/organization chart which is not fit for purpose, appointment of incompetent people; the inability to raise and collect its own revenues and the adoption of unfunded funds, among others.

She said that employing people who are not qualified or trainable has brought municipalities into untenable situations.

She further added that municipalities need to have competent and skilled managers and people up to the task, especially in the Budget and Treasury Office (BTO) which she called the bedrock of municipal performance.

The technical team presented the comments from the five year financial assessment and the picture presented in terms of Section 138 and 140 of the MFMA leaves much to be desired.

“The culture of planning to spend more resources than available is flawed and cannot be changed by simply adding more resources. Instilling fiscal discipline and consequence management are key to creating financially sustainable municipalities. area that we have left unsupervised and we have relegated our responsibilities and are afraid of being unpopular as managers. When you lead, you have to make unpopular decisions as leaders,” Rosho said.

She also denounced the culture of not holding accountable managers who fail in their duties and therefore stopping the rot that is taking hold in municipalities.

The meeting brought together key stakeholders including political and administrative leaders of municipalities, SALGA, COGHSTA, National Treasury, who made recommendations on what needs to happen to help municipalities fulfill their mandate to communities.

Mayors must submit the report to their respective councils within 30 days and provide the provincial treasury with the council resolution.

Given the current status quo, the collective agreed that a financial recovery plan must be implemented to improve the financial viability of struggling municipalities.

City leaders welcomed the comments as a true reflection and promised to work with the Provincial Treasury and other key players to implement the recommendations to turn the corner.

The Executive Council has already decided that municipalities facing a serious financial crisis should be placed under intervention pursuant to Section 139(5) of the RSA Constitution, read in conjunction with Section 139 of the MFMA.

Sarah J. Greer