Herman Mashaba calls on Treasury to strengthen control over Johannesburg funds due to financial crisis

Songezo Zibi, chairperson of the Standing Committee on Public Accounts, stated that the Ministry of Finance is not omnipotent, and the National Treasury cannot constantly monitor the financial accountability of municipalities.

Johannesburg Governance Issues

Zibi noted that the City of Johannesburg is overly complex, and the quality and rigor of political oversight and leadership from its officials require improvement. He participated in a briefing by the Parliamentary oversight committees where the recent appearance of the municipality before Parliament was discussed.

Audit and Financial Status

The latest report by the Auditor-General, Tsakana Maluleke, indicated that municipalities in the Gauteng province, particularly, are facing declining audit outcomes, deteriorating financial health, and service delivery challenges. The City of Johannesburg was highlighted as an entity requiring continuous intervention from both executive and oversight bodies after its audit opinion downgraded from unqualified to qualified.

Mayor Dada Morelo, speaking before the Scopa Committee and the Portfolio Committee on Joint Municipal Affairs and Traditional Affairs (CoGTA), assured that his administration intends to restore the city's financial health. It was revealed that over the past five years, the city has written off R45.16 billion in expenditures that were unauthorized, irregular, fruitless, and wasteful (UIFW).

Three Key Observations by Zibi

Zibi emphasized that work with the City of Johannesburg is being conducted jointly with CoGTA, but it will continue across all municipalities. He stated that they will work with the Auditor-General, other departments, the National Treasury, and CoGTA until the end of the seventh Parliament to ensure a visible level of service delivery to the public.

He outlined three main points observed by the two committees in their work with the City of Johannesburg. Firstly, there is a need to improve the quality and rigor of political oversight and leadership from the Mayoral Committee Members (MMC) and the board governing the large number of agencies in the City of Johannesburg. Since there are about 12–13 agencies plus the core administration, increased control from the MMC, the mayor, and council committees is required, especially the Municipal Public Accounts Committee.

Zibi added that with the effective execution of these functions, it might even become unnecessary for municipalities, including the City of Johannesburg, to appear before Parliament.

Structural Complexity and Contracts

The second observation concerned the excessive complexity of the city. In Zibi's view, there is no other city on the planet that has 13 structures, each with its own management system, board of directors, and leadership, which the Auditor-General must assess separately. This complexity hinders effective political and executive oversight.

The third observation, named by Zibi, related to contract and project management. The Auditor-General raised numerous questions regarding contract management, unpaid supplier invoices, and the unavailability of technical drawings, despite contractors performing the work and continuing to receive payment. These issues extend to agencies such as City Power and Pikitup, some of which are experiencing cash flow problems.

Further Steps and Remarks by Mkhize

Zibi confirmed that they are not satisfied with the current situation but intend to engage with the City of Johannesburg and other metropolises on an ongoing basis with other institutions so that residents receive a decent level of service. Zweli Mkhize added that they have been tasked with clarifying many issues. He mentioned the shift from financial management problems to difficulties arising from credit institutions, which expressed dissatisfaction over huge debts, service delivery problems, high water losses, and arrears owed to municipalities and Eskom.

Executive Mayor Dada Morelo addressed the press to assure residents and investors of Johannesburg's financial stability, despite increased scrutiny from the National Treasury. He emphasized that the metropolis' budget is funded, and critical services will be protected during the resolution of cash flow and management issues.

Interaction with the National Treasury

Speaking on Wednesday, Morelo stated that the city is fully cooperating with the National Treasury following the application of Section 216(2) of the Constitution and Section 38(1) of the Municipal Finance Management Act (MFMA), which aim to enhance financial accountability. Morelo quoted a letter received from the National Treasury confirming that the city's Annual Budget for 2026/27 is secured by funds.

He noted that this information is encouraging as it confirms adequate financial management and the absence of a crisis. Nevertheless, he added that additional steps are required to manage revenue collection and income indicators.

Recovery Plan and Priorities

Morelo detailed current interactions between the city and the National Treasury, including discussions in intergovernmental structures and the President's Finance Working Group, which have already yielded positive results. The Mayor presented a recovery plan focused on transparency, accountability, and improving financial control mechanisms. Among the priorities is settling debts owed to essential service providers.

He specified that payments to Rand Water and Eskom will be made by mid-July. Furthermore, the city has revised its strategy to reduce unauthorized, irregular, wasteful, and inefficient expenditures (UIFWE) in line with National Treasury recommendations.

Financial Challenges and Infrastructure

According to Morelo, approximately R1.8 billion in historical expenses have been brought into compliance through management processes, and another R6.4 billion is under review by municipal enterprise boards. He identified City Power electricity procurement as the main driver of new overspending, which reached R2.1 billion by the end of the third quarter. The Mayor also acknowledged financial difficulties within the waste management company Pikitup but assured that measures are being taken to stabilize its operations.

Morelo stressed that under the metropolis' Transport Services Reform Programme, funding for fleet maintenance, fuel, landfill operations, and other necessary needs for garbage trucks is protected. He confirmed the resumption of waste collection on Tuesday after disruptions related to the organization's cash flow constraints. However, he admitted that deficiencies remain in the city's revenue collection systems that require modernization.

Service Preservation and External Funding

Despite existing challenges, Morelo highlighted that residents will continue to receive essential municipal services. He stated that service delivery remains the priority, and funds obtained through improved collections and cost reductions are directed towards protecting water supply, electricity, waste disposal, and public safety services.

The city is also attracting external funding for infrastructure investments. Specifically, for the modernization of City Power's infrastructure, a facility of €200 million (approximately R3.8 billion) has been secured from the German development bank KfW, and about R1.75 billion has been allocated for capital projects at Johannesburg Water.

Maintenance Warning

Meanwhile, Morelo warned residents about a scheduled Rand Water maintenance shutdown on July 17th, which will affect water supply in a significant part of Johannesburg. The maintenance, planned from 7 am to 7 pm, may lead to reduced inflow into several Johannesburg Water systems, potentially causing low pressure or interruptions in areas including Sandton, Midrand, Randburg, Roodepoort, Soweto, Lenasia, and parts of the city center.

The Mayor frankly warned residents that recovery after the work concludes at 7 pm will not be immediate, as reservoirs and towers must be filled before normal distribution resumes. Therefore, residents should expect restoration over the next few days. He urged households to store sufficient water before the shutdown and conserve it to aid in restoring reservoir levels. Morelo concluded that Johannesburg is the country's economic hub, and while problems are real, they are surmountable, with the current situation characterized by discipline, transparency, and accountability.