Local is Not Lekker: Why Municipalities are Failing

Annalien Carstens CA(SA) is the managing director of Altimax, a company that has spent nearly 20 years trying to help more than 140 municipalities succeed. We spoke to her about why, despite interventions, local government is increasingly falling apart. 

Failing municipalities turn their back on the basics 

“You can’t get a consultant to brush your teeth in the morning,” says Annalien Carstens, who explains that many failing municipalities lack the discipline necessary to do everyday basic accounting. “You find municipalities that haven’t done bank reconciliation for the past five years. Now, even our smallest little private sector businesses know that you need to do bank reconciliation.”

Because these building blocks necessary for reliable financial statements are absent, it makes drafting accurate financial statements difficult. “The fact of the matter is you can get in as many consultants as you wish. The problem is that: firstly it costs money, which you don’t have. Secondly, a consultant can’t do what you’re supposed to do for yourself. Municipalities often get the consultants in too late so the consultants can never solve the heap of problems that the municipality has gotten itself into during the year.”

The evil circle that ends in bankruptcy

“Most of our municipalities are in financial disarray,” says Carstens. “The biggest challenge facing South African municipalities is that consumers are simply not paying for services. We are sitting with a scenario where many of municipalities are making a provision for impairment for up to 98 percent of their debtors’ book.”

Carstens explains that this culture of non-payment often stems from residents not having received adequate levels of service delivery, making them reticent to pay. Shoddy payment collection may also result from years of lousy accounting controls. The end result is that, even if the political will exists to turn its affairs around, there is no longer the money needed to do so. In turn, this leads to worse accounting practices and service delivery and worse debt collection or what Carstens describes as “the evil circle”.

Where there is no political will, there is no way

Altimax has assisted many municipalities with turnaround strategies and training. Success or failure often comes down to the political will to improve and the stability needed to execute this mandate.

Carsten references Maluti-a-Phofung Local Municipality in the Free State, which Altimax worked with for 12 years. “At some point in time, they had the worthy award of owing Eskom the biggest amount of money in the country of all municipalities.” 

Carsten recalls how matters slowly started to improve. “The municipality only had a qualified opinion after years and years of the disclaimers. So we were quite proud of that achievement, and we thought we were seeing the top of the mountain. But then big political changes occurred, and now they are back to disclaimers for the past three years to the extent that they haven’t even submitted anything to the Auditor General.”

Where success does occur, it is because of sustained willpower. “Where you’ve got a strong council, be it ANC, or DA, and you’ve got a strong mayor together with a strong municipal manager that sets a strategy and sticks to it. That turnaround can actually work.”