The Auditor-General's office says the financial position of 28% of South Africa's municipalities is so dire that there is "significant doubt" on whether they will be able to continue operating as going concerns in the near future.

Municipalities cannot continue operating and providing services if their financial health concerns remain, the Auditor-General's (AG's) office says.

The AG's office released its 2020/2021 municipal audit outcomes last week, which found only 41 municipalities in South Africa had received clean audits. Its findings were based on the financial statements of 230 municipalities and 18 municipal entities.

The AG's report says municipalities "cannot operate and provide services if financial health concerns remain. Yet local government finances remain under severe pressure due to non-payment by municipal debtors, poor budgeting practices and ineffective financial management."

The AG's assessment of the financial health of 230 municipalities and 18 entities based on their financial statements showed "increasing indicators of a collapse" in local government finances and "continued deterioration over the term of the previous administration".

"At 22 municipalities and one municipal entity, the financial statements were not reliable enough for us to analyse because of disclaimed or adverse audit findings," it says.

The AG's office says the financial...