The worst-run municipalities in South Africa

While eleven municipalities received a disclaimed audit opinion for the 2023/24 financial year, seven of these received the opinion for three or more consecutive years.

Strikingly, the Ditsobotla Local Municipality in the North West Province has failed to achieve anything but a disclaimed audit opinion for eight consecutive years, making it the worst-run municipality in the country.

This is according to the Auditor-General of South Africa’s (AGSA’s) consolidated report of its audit opinions for the country’s 257 municipalities during the 2023/24 financial year.

There are five types of audit outcomes given by the AGSA. The worst is a disclaimed audit opinion, meaning that the entity provided insufficient documentation to support an audit decision.

An adverse audit outcome means material misstatements have been found which are not confined to specific amounts, as was the case for six municipalities.

If a municipality receives a qualified audit outcome, it means the AG has determined that its financial reporting contains material misstatements in specific amounts. This was found to be true for 90 municipalities.

This is followed by a financially unqualified outcome, which contains no material misstatements; however, issues have been raised regarding an entity’s reporting.

Ninety-nine municipalities received this type of audit outcome.

The best result is a clean audit opinion, which means that no misstatements can be found in an entity’s financial reporting.

Forty-one municipalities received this outcome, with 25 receiving the opinion for the fourth consecutive year or more.

Of the eleven municipalities that received a disclaimed audit opinion, all were local municipalities.

Local municipalities are responsible for delivering direct services to communities, while district municipalities tend to handle cross-municipal functions such as infrastructure provision.

Four municipalities received the audit outcome for the first time, all of which are situated in the Northern Cape. These include the Kareeberg LM, Kgatelopele LM, Renosterberg LM, and Tsantsabane LM.

Two others received the opinion for the third year running — the Kannaland LM in the Western Cape and the Lekwa-Teemane LM in the North West.

Another four received the audit opinion for the sixth consecutive year: Makana LM (EC), Sundays River Valley LM (EC), Nketoana LM (FS), and Ratlou LM (NW).

Ditsobotla was the only municipality to maintain the streak for longer than six years.

R3.48 billion combined expenditure

According to the AGSA, the seven municipalities with repeated disclaimed audit opinions spent a combined R3.48 billion during the 2023/24 year.

“They have not been properly accounting for these funds and have been making decisions based on unreliable financial and performance information,” the AGSA said.

This was attributed to a lack of basic financial control and proper records management, which the AGSA has not addressed because of instability in key positions, high vacancy rates, and audit action plans that were not implemented.

The AGSA said this resulted in six of the seven, excluding Ratlou LM, being classified as financially distressed.

“In 2023/24, these six municipalities disclosed (or were required to disclose) in their financial statements that there is significant doubt about their ability to continue operating based on their financial position,” it said.

Another issue within these municipalities was a lack of IT integration between banking and financial transactions, resulting in manual workarounds.

The AGSA stated that this was most evident in the areas of procurement and contract management, where contractor performance was not adequately monitored, competitive bids were not invited, and quotation deviations were not adequately justified.

Placed under national administration

In early September, the Minister of Cooperative Governance and Traditional Affairs, Velenkosini Hlabisa, placed the collapsing Ditsobotla LM under national administration.

This followed ongoing reports of a collapse in basic service delivery, political instability, corruption, and financial mismanagement in the district.

The municipality comprises Lichtenburg, Coligny, and Ga-Raphalane, with a population exceeding 200,000.

It has also been a significant agricultural hub in the heart of the North West, with critical manufacturing, wholesale, and retail industries.

However, political chaos has engulfed the municipality, resulting in ongoing water and electricity failures, as well as collapsing sanitation and road infrastructure.

The municipality’s failures have also significantly impacted local business and investment. Clover closed its flagship cheese factory in Lichtenburg in 2021, attributing this to poor service delivery and infrastructure problems.

President Cyril Ramaphosa visited the municipality in 2022, referring to it as “a town taken over by gangsters”. Similarly, Hlabisa described it as “one of the ten most distressed municipalities in the country”.

Following the President’s visit, he said there would be “a municipality fit for purpose” by the end of the year — something that never materialised.