Municipalities spend R1.6bn on consultants

As consultants increasingly perform the work of municipal officials for financial statements, municipal spending across the country climbed to R1.6bn in the 2024/2025 financial year, up from R586m in 2014/2015.

The increase comes despite municipalities employing staff who are paid to carry out many of the functions internally.

This is according to auditor-general (AG) Tsakani Maluleke, who briefed parliament’s co-operative governance and traditional affairs (Cogta) committee on Wednesday.

During her presentation, Maluleke revealed 61% of financial statements submitted for audit contained material misstatements related to work performed by consultants.

The main reason for hiring consultants was a lack of skills in municipalities. Consultants were appointed due to:

• a lack of skills (53%);
• a combination of skills shortages and vacancies (41%); or
• vacancies (6%).

“Reliance on consultants was most pronounced in financial statement preparation, asset management and tax-related matters,” said Maluleke.

“Consultant appointments were often recurring and increasingly concentrated among a limited number of service providers across many service areas and over successive years.”

“These audit outcomes are primarily attributable to inadequate institutional capability and governance deficiencies within the accountability ecosystem

—  Tsakani Maluleke, auditor-general

She said 225 municipalities used consultants in the 2024/2025 financial year, up from 179 a decade ago.

“Over the past four years, mayors and councils of the sixth administration have made limited progress to strengthen governance and improve service delivery as residents and businesses continue to experience unreliable service delivery, environmental hazards and deteriorating infrastructure.

“They further oversaw municipalities with deteriorating financial health.”

In the Eastern Cape:

• eight municipalities received an unqualified opinion with no findings, an increase from four a decade ago;
• a further 12 municipalities received an unqualified audit with findings;
• 17 received qualified audits with findings; and
• two received disclaimers with findings.

A disclaimed audit opinion is the worst outcome a municipality can receive, indicating auditors were unable to obtain sufficient appropriate evidence to verify most of the information contained in its financial statements.

“These audit outcomes are primarily attributable to inadequate institutional capability and governance deficiencies within the accountability ecosystem,” Maluleke said.

The AG’s overall financial health assessment found:

• only 35% of municipalities as having good financial health; while
• 40% were assessed as concerning; and
• 25% as unfavourable.

The Free State, Mpumalanga and the North West had the most municipalities in financial distress.

“At year-end, more than half of municipalities (51%) did not have enough current assets to cover what they owed, while 174 municipalities (72%) did not have sufficient cash to pay their creditors.”

A total of 116 municipalities (45%) adopted unfunded budgets during the period under review.

The municipalities committed to spending R288bn they had no means to fund.

The lack of accountability at most metros is clear from the slow response to dealing with unauthorised, irregular and fruitless and wasteful expenditure, and the ineffective accountability structures and processes that we observed

—  Maluleke

Maluleke said weak revenue management and spending practices also continued to place pressure on municipal finances:

• Municipalities took an average of 129 days to collect amounts owed and wrote off R62bn in debt that could not be recovered.
• Infrastructure neglect and poor management resulted in water distribution losses of R14bn and electricity losses of R21bn.
• Since 2021/2022, municipalities and their entities incurred irregular expenditure of R145bn. Of this, R40bn was incurred in 2024/2025.
• Non-compliance with procurement and contract management legislation accounted for 87% of this total.

“Consequence management remained inadequate, with this most evident in the slow responses to investigating allegations of financial and procurement misconduct and fraud indicators, and not investigating or not properly dealing with unauthorised, irregular and fruitless and wasteful expenditure balances.

“This has resulted in recurring non-compliance and delays in financial loss recoveries, disciplinary processes and referrals to law-enforcement agencies.”

The audit outcomes for metros continued to deteriorate in 2024/2025, with none achieving a clean audit.

Maluleke said this shows good governance was not in place at metros.

“The lack of accountability at most metros is clear from the slow response to dealing with unauthorised, irregular and fruitless and wasteful expenditure, and the ineffective accountability structures and processes that we observed. ”

In Nelson Mandela Bay, the municipal public accounts committee has spent months grappling with the metro’s R28bn in unauthorised, irregular, fruitless and wasteful expenditure, amid repeated failures by officials to fully account for how the funds were used.

The cumulative total, built up over several financial years, is the highest of its kind among municipalities.

Maluleke said it was also rare for metro leadership, including mayors, to account to provincial legislatures.

“Notably, parliament has now increased its oversight over metros, which is expected to close the persistent accountability gaps over time.”

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