The Nelson Mandela Bay municipality’s governance failures have once again been laid bare, with red-flagged contracts, weak oversight, unlawful spending and staggering losses in basic services driving the city into yet another qualified audit.
Emergency repairs to the Matanzima access bridge in KwaNobuhle, approved without proper competitive bidding and pushed through under questionable deviation grounds, also formed the basis of the qualified opinion.
The findings form part of the auditor-general’s (AG) 2024/2025 audit report, which handed the metro a second consecutive qualified audit opinion after officials failed to address previous red flags.
The metro scored an unqualified audit for the first time in 12 years for the 2022/2023 financial year.
According to the Eastern Cape AG, certain previous findings had not yet been addressed by the city, prompting repeated findings.
The AG flagged deepening control weaknesses, faltering service delivery, and lingering fraud and irregular expenditure.
The report is contained in the draft annual report for the 2024/2025 financial year, which is yet to be presented to the council for adoption.
However, the findings contained in the report are unlikely to change.
In its findings, the AG reported that the metro recorded R1.48bn in electricity losses during the year under review, up from R1.2bn in the 2023/2024 financial year.
This represents a 26.81% loss of total electricity purchases.
Water losses totalling R392.56m were recorded, which equates to 52.74% of all water used.
The material findings in the AG’s report are for:
- Expenditure management;
- Procurement and contract management;
- Consequence management;
- Revenue management;
- Annual financial statements;
- Asset management;
- Strategic and performance management; and
- Environmental management.
The metro was also criticised for underspending on its conditional grants by R452.28m.
Mayor Babalwa Lobishe said the audit outcome marked a moment for decisive leadership and reform.
“We accept the auditor-general’s findings without hesitation, and we accept our responsibility to correct what is not working,” she said.
“As the political leadership of Nelson Mandela Bay, we are not interested in excuses or cosmetic compliance.
“We are focused on fixing root causes, enforcing accountability and building a culture of ethical, professional and transparent governance.
“Our residents deserve a municipality that is credible, disciplined and fit for purpose, and that is exactly what we are working towards.”
On expenditure management, the AG found that the municipality had failed to take reasonable steps to ensure that money it owed was paid within 30 days, as required by Section 65(2)(e) of the Municipal Finance Management Act.
“The majority of the irregular expenditure was caused by non-compliance with supply chain management regulation.”
Irregular expenditure totalled R2.08bn, with a large portion of this amount stemming from historical spending.
“Reasonable steps were not taken to prevent fruitless and wasteful expenditure amounting to R4.72m, as disclosed in the financial statements, in contravention of Section 62(1)(d) of the MFMA.
“The majority of the disclosed fruitless and wasteful expenditure was caused by salaries paid to suspended employees.”
According to the financial statement, various officials have been on suspension for more than three months.
Under the South African Local Government Bargaining Council’s disciplinary procedure and collective agreement, suspensions may not exceed three months.
For nearly three years, city manager Noxolo Nqwazi has continued to receive a full salary while on suspension.
Taxpayers have had to fork out even more money to pay those acting in the post.
On procurement and contract management, the AG found some goods and services were procured without inviting competitive bids, as required by Supply Chain Management Regulation 19(a).
“Deviations were approved by the accounting officer even though it was not impractical to invite competitive bids, in contravention of SCM regulation 36(1).
“Similar noncompliance was also reported in the prior year.
“This noncompliance was identified in the procurement processes for the project for emergency repairs to the Matanzima access bridge.
“Sufficient evidence could not be obtained that contracts were awarded to bidders that scored the highest points in the evaluation process.
“Persons in service to the municipality whose close family members had a private or business interest in contracts awarded by the municipality failed to disclose such interests, in contravention of the codes of conduct for councillors issued in terms of the Municipal Systems Act and the code of conduct for staff members.”
The report found the metro failed to investigate irregular expenditure of R2.08bn to determine whether any official could be held liable.
However, according to the financial statements, the city has several cases being investigated, including supply chain management breaches.
A report by the audit committee chair, Michelle Wait, said that during the period under review, the accounting officer position was occupied by several executives, which created leadership instability.
She said governance risks were made worse by vacancies in key departments.
About 70% of executive director posts were acting appointments.
In addition, Wait said that numerous delays and breakdowns in council meetings had severely impacted the operational effectiveness of the municipality.
“The committee has noted the perpetual postponement of its meetings due to the conflicting schedules of the municipality,” Wait wrote.
“Coupled with this challenge is the inability of some executive directors to attend scheduled meetings of the committee and the delegating of their accountability to representatives who come to meetings unprepared and thus unable to answer probing questions of the committee.
“In addition, certain executive directors do not disclose any known or alleged fraud to the committee as required quarterly.”
Municipal spokesperson Sithembiso Soyaya said any assertions that the audit opinion was a regression from the previous financial year were false and misleading.
“The auditor-general issued a qualified opinion based on specific, clearly articulated technical and control-related matters, including non-current provisions, service charge recognition, contracted services, capital commitments, and property, plant and equipment,” Soyaya said.
“These issues are largely historic and systemic in nature, many of which have been recurring over several financial years, and do not indicate institutional collapse or a breakdown of governance.
“The city acknowledges the findings in full and takes responsibility for addressing them decisively.”
He said the municipality had adopted a structured audit improvement programme anchored on leadership accountability, strengthened controls and good corporate governance.
This included the cascading of performance management across all levels, firm enforcement of procurement and deviation controls, compulsory disclosure of interests, stabilisation of leadership in critical positions, and the deployment of dedicated teams to drive audit action plans with clear accountability.
“Process reforms are under way to centralise key financial controls, strengthen contract and asset management, address historic irregular expenditure through independent investigations, and improve revenue recognition and billing integrity.
“In parallel, the city is investing in automation of financial reporting, procurement, document management and performance systems to reduce manual risk, improve data integrity and ensure sustained compliance with legislation and accounting standards.”
Soyaya said planned interventions were already being executed and were subject to continuous monitoring through executive management, the clean audit steering committee and the audit committee.
“Progress is tracked against measurable milestones to ensure consequence management, transparency and continuous improvement.”
The Herald
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