Municipal financial struggles overshadow promises of service delivery reform

Municipal financial challenges overshadowed the promises made during the recent local government elections, which focused on enhancing service delivery in South Africa. The Auditor-General's report for the 2024-2025 fiscal year revealed that 174 out of 257 municipalities were unable to pay their creditors, with 33 of these municipalities having faced financial difficulties for over four years.

Approximately 116 municipalities approved budgets without adequate funding, and 54 municipalities disclosed uncertainty about continuing operations, while eight received modified audit opinions due to the lack of such disclosures. New municipal councils will inherit these financial challenges, with the South African Local Government Association (SALGA) emphasizing the need for political oversight alongside effective municipal administration.

The national Treasury attributes the financial struggles to weak governance and poor leadership, calling for a fundamental shift in governance, accountability, capacity building, and cash generation. Economist Dr. Bonke Dumisa stated that new councils must address the inherited financial situation, including improving money collection, controlling spending, paying creditors, and maintaining essential services.

National Treasury emphasized that municipalities are primarily responsible for resolving their financial issues, with provinces providing support and the Treasury implementing recovery mechanisms. If a municipality reaches a financial crisis, Section 139(5) of the Constitution allows for mandatory provincial intervention, including a financial recovery plan.

To tackle these issues, the Department of Co-operative Governance and Traditional Affairs (CoGTA), in collaboration with SALGA and the National School of Government, is preparing a mandatory councillor induction program covering governance, financial management, institutional capability, and service delivery. Further interventions are expected after the Cabinet approved the Reviewed White Paper on Local Government, which outlines a 90-day transition plan and prioritizes reforms during the first 18 months of the new administration.