6 minute read
MUNICIPAL PERFORMANCE
by kwedamedia
ELEVATING MUNICIPAL PERFORMANCE THROUGH TECHNOLOGY TO ACHIEVE CLEAN AUDITS
There is no denying that integrating technology into municipalities in South Africa has the potential to improve operational efficiency. The benefits include enhanced citizen participation, advanced data management, and process automation.
Poor governance at municipalities can hinder the effective implementation and maintenance of technological solutions. In contrast, under good governance, technology can enhance transparency, efficiency, and citizen engagement.
However, the success of these initiatives hinges on robust governance structures. Addressing core governance issues is critical to prevent the worsening of existing challenges and to ensure progress aligns with aspirations for technological advancement.
Governance, Financial Management, Supply Chain Management (SCM) and Asset Management Challenges
South African municipalities grapple with pervasive governance issues, including transparency deficits and inadequate public participation, which hinder accountability mechanisms. Additionally, persistent financial mismanagement accompanies SCM challenges, such as poor recordkeeping and corruption further complicate matters. These systemic issues impede efficient service delivery and contribute to ongoing audit failures.
Addressing Systemic Issues
Tackling multifaceted challenges demands a comprehensive approach. It is critical to strengthen governance structures, improve transparency, and ensure compliance with the legal framework.
Improving service delivery requires municipalities to be more capable in asset management, SCM, financial management, and governance. Robust systems and competent personnel are also essential elements in overcoming these hurdles.
Municipalities in South Africa face distinct challenges at the metropolitan, district, and local levels. Governance remains a critical hurdle, compounded by persistent financial management difficulties and operational deficits.
Rising corruption trends also make this worse, and SCM issues put a drain on resources and impede development, particularly in rural areas.
The advantages and disadvantages of technology for municipalities
Technology offers both advantages and disadvantages. However, in contexts where governance is lacking, the potential benefits of technology may not be fully realised, leading to increased vulnerability, particularly in municipalities.
Effective governance is essential for harnessing the benefits of technology in municipalities. Without proper oversight and management, technological advancements may exacerbate existing vulnerabilities rather than alleviate them. For instance, without transparent and accountable governance structures, there is a higher risk of corruption, misuse of funds, and inadequate service delivery.
Furthermore, poor governance can hinder the effective implementation and maintenance of technological solutions. This may result in inefficient use of resources, limited access to services, and disparities in technological infrastructure between urban and rural areas.
In contrast, under good governance, technology can enhance transparency, efficiency, and citizen engagement in municipalities. For example, digital platforms can improve access to information, facilitate participatory decision-making, and streamline administrative processes.
Additionally, technologies like data analytics and remote monitoring can enable better resource allocation and proactive problemsolving.
Therefore, while technology presents opportunities for advancement, its benefits are contingent upon the presence of essential good governance practices. Without effective governance, municipalities may struggle to leverage technology effectively, leaving them more vulnerable to challenges and inequalities.
Proposed Solutions and Measures
Proposed measures include a range of strategies tailored to address specific challenges. These include establishing oversight committees, implementing performance management systems, and investing in technology infrastructure. While some initiatives have seen partial implementation, achieving clean audits remains elusive, emphasising the need to adopt proposed measures comprehensively.
Stakeholder cooperation is necessary to guarantee compliance and promote performance enhancement.
Detailed measures that may be adopted by struggling municipalities may be referred to in an article published in late November 2023 in the Journal of Local Government Research and Innovation, titled “Measures that may assist non-performing municipalities in improving their performance”.
Financial management and reporting
Among the key points to note in the journal of Local Government Research and Innovation is the financial management and reporting.
Most municipalities in South Africa are technically insolvent as the liabilities outweigh their assets and lack the liquidity to cover their operating expenditures (Ryan 2020).
Municipal deficits have worsened and prevent municipalities from progressing (Glasser & Wright 2020; Mishi et al. 2022).
The latest municipal financial sustainability index (NT Ratings Africa 2020) found that 54 municipalities had more than 5% operating deficits of total direct revenue and 146 had financial statement issues.
According to National Treasury, 82 municipalities failed to make on-time debt payments in the 2019–2020 fiscal year, indicating that some municipalities have difficulty adhering to Section 140(2) of the MFMA.
Section 140(2) of the MFMA prescribes that municipalities have a financial recovery plan to meet financial obligations to provide service delivery.
These recovery plans must include:
1. Establishing spending and income goals
2. Establishing budget parameters that bind the municipality for a length of time or until certain circumstances are met, and 3. Determining the exact revenueraising methods required for financial recovery, including the municipal taxes or tariffs rates being set to achieve financial recovery.
There were 82 municipalities (National Treasury 2020a) that were currently functioning without recovery plans; therefore, they could neither deliver services as per mandate nor were able to meet their financial needs.
Proper financial management can be comprehensive and complicated (Laubscher 2012). Interventions from government and legislation are expected to guide financial management. Despite interventions from provincial or national domains, municipal performance did not improve significantly.
These interventions occurred in municipalities based in the North-West Province (Ditsobotla and Ngaka Modiri municipality), Mpumalanga Province (Mbombela and Pixley Seme Municipalities), Eastern Cape Province (Alfred Ndzo, Kiay-Kamma and Mnquma Municipalities), Free State Province (Mhokare and Xhariep Municipalities) and KwaZuluNatal Province (Amajuba, Umzinyathi, Newcastle and Utrecht Municipalities) (Ntonzima 2011).
The literature further indicates other financial management challenges.
Glasser and Wright identified challenges affecting municipal financial management, namely the 2018 failure of VBS Bank, which caused losses for municipalities that had illegally invested in this bank. Glasser and Wright further indicate that some of the financial distress in municipalities is because of internal processes.
These include improper financial management processes, such as demarcation in 2000 was another issue that municipalities faced in managing budgets. There were 830 municipalities before delineation in 2000 (Laubscher 2012), whereas now there are only 257. As such, municipal boundaries are too large for effective and efficient service delivery and financial administration. Thus, municipalities cannot perform adequately in accordance with their mission and in attaining clean audit results.
Conclusion:
Setting governance as a top priority is essential to the effective use of technology to improve municipal performance. It is important for overall progress and effective service delivery to address foundational issues.
Through collaborative efforts among stakeholders, South African municipalities can navigate systemic issues and embrace opportunities for enhanced governance and technological advancement.
Municipalities may establish a foundation for sustainable development and improved quality of life for all citizens by prioritising governance.
* Dr Nzama-Sithole (PhD in Auditing and Certified Internal Auditor) is a senior lecturer and deputy head: Department of Commercial Accounting College of Business & Economics at the University of Johannesburg
