18 November 2018

South Africa: 24 Municipalities Now Under Administration

Since October 2016, 24 municipalities have been placed under administration, with 13 of these being placed under administration since June.

This is according to the Department of Cooperative Governance and Traditional Affairs (Cogta), which provided an update of municipalities placed under administration to News24 last week.

The reasons provided by Cogta paint a picture of municipalities that have collapsed and are crippled by financial mismanagement. The reasons range from poor - sometimes unlawful - financial management; unspent funds and an inability to collect revenue; spiralling debt and collapsing infrastructure, and governance failures stemming from dysfunctional councils.

In his budget vote speech in Parliament in May, Cogta Minister Zweli Mkhize said 11 municipalities were under administration. Six of those were in KwaZulu-Natal; two in the Free State; and one each in the Eastern Cape and the Western Cape.

Mkhize said that 87 municipalities from around the country, out of the country's 257 municipalities, were "dysfunctional or distressed". Mkhize said 14 teams would be dispatched to deal with issues facing municipalities, and Cogta and Treasury would work together to establish a joint technical intervention team.

According to the latest list, eight municipalities, all of them in the North West, were placed under administration at the beginning of September. There are now seven municipalities under administration in KwaZulu-Natal, three each in the Free State and the Eastern Cape, and one each in the Western Cape, Limpopo and Gauteng.

Two of the collapsed municipalities on Cogta's list, both from the North West, feature in the Reserve Bank's report into wide-scale looting at VBS Mutual Bank.

7 more municipalities on the brink

The Mahikeng municipality was placed under administration on September 1, partly because it "illegally" invested R85m in VBS. According to Cogta, this includes R60.1m "erroneously" paid by the department, which the municipality is now refusing to pay back.

While the Kagisano local municipality did not invest in VBS, it falls under Dr Ruth S Mompati municipality, which invested R101m in the failed bank, according to the Reserve Bank's report.

According to the Mail & Guardian, seven more municipalities in Limpopo could be placed under administration because of the collapse of VBS. They are reportedly on the brink of insolvency.

Cogta spokesperson Musa Zondi told News24 that the sudden rise in the number of municipalities under administration was due to a combination of two things: a regression in the performance of some municipalities and an "interventionist approach" by Mkhize.

He said there was a "worrying trend" of municipalities that were struggling to pay salaries, such as the West Rand municipality. It is not under administration, but invested over R77m in VBS, according to the Reserve Bank report.

In these cases, Zondi said there had been problems "for some time" which had been exacerbated by the fact that they invested money they did not have in VBS. He said the department had sent in teams of engineers or experts to help municipalities collect monies properly. He said the more aggressive interventions in municipalities were informed by the fact that the country's economy would not work if its local municipalities do not work.

Source: News24

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