Joburg mayor points fingers over lost R23.6 billion

Under fire from National Treasury, the executive mayor of Johannesburg blames the previous, DA-led administration for R23.6 billion of unauthorised, irregular, fruitless, and wasteful expenditure (UIFWE).

Addressing the media in Braamfontein on Thursday, August 14, Mayor Dada Morero said that this large sum of money has accumulated over time and was caused by the “poor management of the DA-led coalition”.

“The accumulated figure has progressively increased in the city’s financial statements over the years. During this time, the expenditures were largely unaddressed and not regulated,” Morero said. 

He claimed that the previous administration did not take wasteful and fruitless expenditures seriously and did not have any controls in place to address this. 

He was speaking in response to a letter received from Finance Minister Enoch Godongwana, warning that National Treasury might withhold funding from Johannesburg unless the city explains how it plans to address the billions of funds lost to UIFWE.

Godongwana’s letter noted that its recent Auditor-General report identified Johannesburg as a metro with weak financial controls and a failure to investigate UIFWE.

The finance minister gave the city of Johannesburg 14 days to respond to his letter with an action plan, including consequences for the overspending. 

Morero’s action plan consists of activating a disciplinary board to investigate spending and mete out consequences for irregular expenditure.

Tumi Ramonotsi, a non-executive director at the City of Johannesburg, has been appointed as leader. 

DA Johannesburg caucus leader Belinda Kayser-Echeozonjoku laid the blame square at the feet of the ANC-led administration.

“When the City of Johannesburg loses in court defending unlawful and unconstitutional decisions, like their now unconstitutional VIP-Protection policy, they rack up fruitless and wasteful expenditure.”

“The ANC has proven, time and again, that it cannot govern Johannesburg responsibly. The City’s finances are in freefall, service delivery is grinding to a halt, and now the very funding that keeps Johannesburg afloat is under threat.”

R6.7 billion still unaccounted for

Of the R23.6 billion, R13 billion consists of unauthorised expenditure. This, he claims, was due to bulk purchases of electricity and water that exceeded the approved budget. 

“These purchases are primarily driven by the consumption of the services by residents alongside both technical and non-technical losses that occur during service delivery,” he said. 

According to the mayor, about 35 to 40% of electricity and water is lost. “We are trying our level best to reduce our losses by 10% this financial year,” he said. 

He added that losses are also caused by residents and businesses bypassing electricity meters and connecting to the grid illegally.

Irregular expenditure contributed to R9.9 billion of the total. The mayor said this amount was due to the city acquiring goods and services without complying with procurement regulations. 

“This does not imply that the goods and services were not received, only that there was noncompliance in the procurement process,” he explained.

The city recorded that R753 million was spent on fruitless and wasteful expenditure. 

Morero said that he was already aware of the issue and approached the presidency to request an urgent working group to monitor and assist with a turnaround plan to address the city’s finances and service delivery. 

This working group, the “bomb squad”, assisted with investigations into the city’s overspending, which are ongoing. 

Godongwana said in his letter to the city that the expenditure must be investigated and can only be written off once this investigation is completed and the city provides proof that they have implemented consequences. 

Of the full amount, R12.9 billion has now been regularized and accounted for and investigations have been completed regarding a further R4 billion. 

This leaves R6.7 billion still under investigation. According to the mayor, six matters totalling R535 million are nearing conclusion and an additional 12 matters totalling R2.5 million are proceeding to preliminary investigation. 

The mayor said that based on this progress, he expects the UIFWE to be reduced when the 2024/2025 financial year statements are presented to the Auditor General.