29-07-2025
Financial health of seven of SA's eight metros ‘a grave concern'
They do not have the skills and capability to achieve their plans and objectives, or to deliver and maintain their infrastructure.
If metropolitan municipalities were to deliver the quality services expected by citizens, this would have a significant impact on the lives of most South Africans and businesses – and this is a noble (and very necessary) goal worth working towards.
Metros are what are described as category-A municipalities, which grants them the exclusive executive and legislative authority within their areas of jurisdiction, as well as assigns them full water, sanitation, refuse and electricity functions. Their mandate is to drive development and economic sustainability.
In the 2023-24 reporting period, the eight metros (Cities of Cape Town, Ekurhuleni, Johannesburg and Tshwane; and Buffalo City, eThekwini, Mangaung and Nelson Mandela Bay) delivered services to 8.9 million households – 46% of all households in the country. Together with their entities, they were responsible for 57% (R351.37-billion) of the estimated local government expenditure budget for the year.
However, since the sixth local government administration took office in 2021, the metros have not shown real improvement. In fact, three of the eight received an unqualified audit opinion with findings and four a qualified audit opinion with findings in 2023-24, which are not desirable as these metros are not performing optimally and are facing several challenges.
Only the City of Cape Town achieved a clean audit, sustained from previous years.
It does not have to be like this
Metros have the right kind of budgets and prime locations to attract and retain the best talent money can buy. And where talented individuals are given the space to do their work and are held accountable, improvements are more likely. The stability of the administrative municipal management is also crucial in this respect.
The financial health of the metros remains a grave concern. Despite implementing financial recovery plans and turnaround strategies, metros continue to struggle to improve their revenue collection. The City of Tshwane and Mangaung have both disclosed significant doubt for four years or more about their ability to continue operating fully as a going concern.
This precarious financial position has resulted in the credit rating of some metros being downgraded, limiting their ability to borrow funds for critical infrastructure projects that are at the heart of service delivery.
Buffalo City, City of Ekurhuleni and eThekwini were downgraded by ratings agencies who doubted their ability to pay their debts because of declining revenue collection. Downgrades also lead to higher borrowing costs.
To illustrate the point, by year-end, metros had written down a combined R118.64-billion in consumer debt, which represents 70% of the total municipal debtors' book of R168.74-billion.
Culture of integrity 'not ingrained' in metros
Most metros have been slow to respond to unauthorised, irregular, and fruitless and wasteful expenditure, as well as ineffective accountability structures and processes. We have concluded that a culture of performance, accountability, transparency and institutional integrity is not ingrained in the metros.
It is not only the metros' inability to collect that is bringing their finances into question. Even when receiving grants, they have been unable to spend to enable them to meet their infrastructure needs.
Metros underspent on their public transport network grant by 11%, with Mangaung underspending by more than 50% due to delays in the completion of grant-funded projects caused by community unrest, termination and re-appointment of service providers, delayed approval of time extensions and delayed payments to contractors.
Nelson Mandela Bay underspent on the urban settlements' development grant by 9%, while Mangaung did not spend this grant in accordance with the grant framework.
Grant underspending results from a lack of institutional capability to plan and execute infrastructure projects, as well as ineffective project management processes.
The reverse also holds true: poor planning resulted in overspending at Buffalo City, City of Tshwane, Mangaung and Nelson Mandela Bay, which collectively overspent R121.23-million on six infrastructure projects in 2023-24.
Dearth of skills, capability lead to harm
In other words, metros do not have the skills and capability to achieve their plans and objectives, or to deliver and maintain their infrastructure.
This lack of skill, among other challenges, has resulted in harm to the public and the environment.
Buffalo City, eThekwini, Mangaung and Nelson Mandela Bay did not have a valid operating licence for their wastewater treatment works, while Buffalo City, City of Tshwane and Mangaung did not maintain or safeguard their wastewater treatment works. Mangaung also did not have a valid operating licence for its solid waste management facility.
As a result of the harm caused by infrastructure neglect and non-compliance with environmental management, we have issued 15 material irregularity notifications at five metros and three of their entities. This included Mangaung because of a lack of proper access controls at a landfill site and Ekurhuleni Water Care Company due to a lack of maintenance at a wastewater treatment site.
Lack of financial, performance and risk management controls
Metros lacked basic day-to-day financial, performance and risk management controls. A key element of internal control is developing and monitoring the implementation of action plans to address identified internal control deficiencies. The municipal manager and the senior management team should drive this.
Audit action plans should address all three areas of audit outcomes, namely financial statements, performance reporting and compliance with legislation.
We found that controls relating to action plans were concerning or poor at all metros, except the City of Cape Town and the City of Ekurhuleni. This demonstrates a lack of responsiveness and accountability when it comes to implementing and monitoring the audit action plans that should provide a roadmap for addressing the root causes of audit findings and preventing further regressions.
High vacancy rate
Another concerning issue is the high vacancy rate at metros, which stood at 22% at the end of 2023-24, slightly higher than the 18% reported in 2020-21. The average senior management vacancy rate has worsened to 25% from the 15% reported in 2020-21.
Mangaung had the highest overall vacancy rate at 61%, while Nelson Mandela Bay had the highest senior manager vacancy rate at 67%.
Without the necessary human resources, fulfilling the mandate of municipalities will remain a pipe dream. So, in the case of finance units, these were generally well resourced, which has helped metros to rely less on consultants. Metros accounted for only 3% (R43.47-million) of the total consultant spend of R1.47-billion in 2023-24, clearly indicating a direct benefit of institutional capability.
There was also a high vacancy rate in the information technology units of five metros. At a time when artificial intelligence should be harnessed to improve the running of business, it is concerning that three metros did not have chief information security and project management officers.
A lack of necessary expertise in the technical units of metros is equally concerning. eThekwini's staff deficit of 58% in the water and sanitation department meant that critical infrastructure maintenance was not performed regularly. Delays in filling these vacancies have led to changes to project designs, scope and timelines, as managers become overburdened by the number of projects to oversee.
At Buffalo City, there was an overall vacancy rate of 15% across key service delivery units, with key positions having been vacant for multiple years. The district engineer position in the electricity department was vacant for 80 months, while the same position in the sanitation, solid waste and refuse removal department was vacant for 24 months.
The shortage of staff with the requisite skills and knowledge significantly hindered the quality and efficiency of essential services such as water, electricity, sanitation, housing and waste management.
Performance management
Performance management systems are also critical to clarify the roles and responsibilities of each role player in the metro environment and provide for measuring performance at least once a year.
Municipalities must develop and adopt appropriate systems and procedures to monitor, measure and evaluate staff performance and establish policies and procedures that define how performance will be assessed, measured and managed.
Buffalo City and Mangaung did not have the required policies and procedures in place – we reported this as material non-compliance with legislation.
Other key functions did not have sufficient staff either. For example, four metros had vacancy rates of 20% or higher, and two metros (City of Tshwane and Mangaung) had vacancy rates above 50% in their internal audit units. This prevented these units from implementing their internal audit plans.
Councils must collaborate with the provincial cooperative governance departments to expedite the processes of appointing skilled municipal managers who have the necessary experience and competency.
