eThekwini Advisors Express Concerns Over Municipality's Financial Health and Debt Burden

The Audit Risk Committee (ARC) found that the eThekwini municipality uses an outdated system for property valuation. This system requires frequent and continuous updates and improvements, which is a laborious process and may negatively affect operational efficiency.

Report Presentation and 2026 Assessment

The ARC Chairperson, Professor Imtiaz Wali, presented his report for the third quarter, ending March 31, 2026, to the eThekwini executive committee (Exco) on Tuesday. One of the issues raised by the committee was the nature of the 2026 valuation roll.

Wali explained that compiling the 2026 valuation roll involves numerous simultaneous changes across the Deeds Office data, the eThekwini municipality's property system, Value Assist, and the Revenue Management System (RMS). He noted that this inevitably leads to minor discrepancies between these datasets, and the review of the 2026 valuation roll revealed some minor exceptions related to property data obtained from various systems to form the consolidated roll.

Report and Municipal Reaction

According to the ARC report, these exceptions are mainly linked to limitations in data extraction and presentation, rather than a lack of underlying property information, which is addressed during current data cleansing processes. The report also stated that the core data in the roll is easily accessible for queries and subsequent verification.

The municipality responded that the system remains functional, stable, and suitable for its purposes, having successfully enabled the issuance of the 2026 valuation roll. City Manager Musa Mbele reported that the system continues to support key valuation processes and integration with the Geographic Information Systems (GIS) and RMS departments. He emphasized that this did not affect the municipality's ability to create a relevant and accurate valuation roll.

System Modernization Plans

Mbele added that the implementation of a new system is part of a broader reform program aligned with the Municipal Standard of Accounting (MSCOA). He reported that the business case for the new system has been approved, and the procurement process, including bid evaluation, is currently underway. In the interim period, the municipality will use the Value Assist system to meet operational needs.

Strengthening Governance and Control

The municipality welcomed the progress made in strengthening governance, accountability, and internal control through the implementation of action plans by the Internal Audit Service and the Auditor-General. As of March 31, 2026, 54% (334 out of 623) of issues identified by the Internal Audit Service have been resolved, compared to 48% (278 out of 579) at the end of December 2025. Mbele noted that outstanding matters continue to receive close attention, prioritizing those unresolved for over 180 days.

Furthermore, Exco received an update on 13 material irregularities identified by the Auditor-General between 2020/21 and 2025/26. The municipality reported that five irregularities have been rectified, five corrective actions have been implemented, two are in the process of further action, and one is under the directive of the Auditor-General. Mbele stressed the enhancement of accountability measures, including incorporating the completion of the audit action plan into the performance evaluation of executive directors, which accounts for 20%.

Finance Minister Enoch Godongwana reported that municipalities participating in the Eskom debt relief program have accumulated an additional R47.173 billion in new debts since April 2023.

Details of the Debt Reduction Program

The Eskom municipal debt relief program was launched by the National Treasury to assist struggling municipalities in settling outstanding bills with Eskom. The main objective was to reduce old municipal debts while simultaneously helping to improve the financial standing of the municipalities and ensure timely payment of Eskom services.

It is important to note that the debt was not automatically written off. Municipalities were required to meet specific conditions, including increasing revenue collection and maintaining current payments to Eskom. A total of 71 municipalities were approved to participate.

Updated Debt Information

In a written response to Parliament, addressing a question from Democratic Alliance (DA) MP Farhat Essack, Godongwana stated that since April 2023, municipalities have accumulated new debts to Eskom amounting to R47.173 billion. He specified that as of May 31, 2026, the 71 participants in the Municipal Debt Relief Program owe Eskom R47.173 billion in new debts accrued since April 1, 2023.

Debt Write-off Conditions

Godongwana also disclosed that the program was not designed for the complete repayment of all old municipal debts. Instead, if municipalities met the program's conditions for three years, their old debt could be written off. However, if a municipality fails to meet the established conditions or is excluded from the program, it will be obliged to repay the debt, and Eskom will apply its standard recovery procedures.

According to the Municipal Debt Relief Program documentation (MFMA Circular No. 124), if a municipality ceases participation in the program and/or does not achieve debt write-off within the three-year period, the municipal debt under the program must be returned to Eskom, and Eskom reserves the right to apply its usual credit control measures for recovery in case of non-payment.

Gauteng municipalities are facing a serious financial crisis, forcing residents to bear the costs. The National Treasury has temporarily suspended funding for a significant portion of the Johannesburg City Council's funds, compelling the municipality to revise its financial strategy amid growing service delivery challenges.

Reasons for financial difficulties

The National Treasury's decision to withhold part of the equitable share of funds from several Gauteng municipalities, including Johannesburg, Emfuleni, Lesedi, Sedibeng District Municipality, Maropeng Town, and Rand West Town, was a predictable outcome of years of financial inefficiency, weak governance, and persistent disregard for the findings of the Auditor-General (AG).

The Auditor-General's consolidated annual report for 2024/25 on local government audits, combined with the National Treasury's Municipal Financial Management Act Compliance Report for 2024/25, presents a deeply alarming picture of local government in Gauteng. Although some municipalities have improved their audit results, the overall trend indicates a worsening financial condition.

Audit results and budgetary problems

The towns of Ekurhuleni, Tshwane, and the Emfuleni Municipality received a qualified audit opinion. Only one out of eleven Gauteng municipalities was rated as being in good financial health. Six municipalities were classified as financially concerning, and four as financially distressed.

Most alarming are the findings regarding unfunded budgets. Nine Gauteng municipalities adopted budgets they could not realistically fund, amounting to R164.8 billion in unplanned expenditure. Furthermore, six of these municipalities incurred unauthorized expenditures totaling R8.4 billion due to lack of funding.

An unfunded budget is not merely an accounting issue; it means the municipality has committed to spending money whose collection is unlikely. Inevitable consequences include unpaid suppliers, infrastructure deterioration, service delays, and rising debt, ultimately leading to reduced quality of services for residents through unreliable water and electricity supply, damaged roads, and diminished municipal capacity.

Debt obligations and expenditure management

The financial difficulties do not stop there. By year-end, Gauteng municipalities and organizations were required to pay Eskom R13.79 billion, and another R5 billion to water boards. It is worrying that 16 audited entities reported a cumulative deficit of R6.92 billion, with seven Gauteng municipalities having deficits. Even more concerning is that these municipalities failed to adjust their budgets during the adjustment process despite guidance and intervention from the National Treasury.

Moreover, the National Treasury's Municipal Financial Management Act Compliance Report identifies unauthorized, irregular, fruitless, and wasteful expenditure as one of the clearest signs of weakness in financial management, internal control, and law enforcement in local government. Despite many municipalities improving their ability to detect and record such expenditures, they continue to fail at the most crucial aspect: investigating cases, recovering public funds, ensuring accountability, and addressing the root causes of financial misconduct.

Culture of impunity

This gap between detection and consequence management remains a structural weakness undermining financial discipline and accountability. Beyond financial losses, the near-total absence of accountability is most alarming. The Auditor-General has once again found widespread failures in investigating and dealing with unauthorized, irregular, fruitless, and wasteful expenditure. Material findings regarding consequence management persist, confirming what the Auditor-General rightly calls a 'culture of impunity.'

Indeed, when financial irregularities are not investigated and officials are not held responsible, poor governance becomes institutionalized rather than corrected. The figures illustrate this failure. Gauteng municipalities closed the financial year with irregular expenditure of R32.96 billion, unauthorized expenditure of R12.63 billion, and fruitless and wasteful expenditure of R3.17 billion. Under the Lesufi administration, R45.92 billion in irregular expenditure accumulated. While R19.57 billion in irregular expenditure was written off, only R479 million has been recovered or is in the process of recovery.

Similarly, R9.82 billion in unauthorized expenditure was written off, alongside over R6 billion in fruitless and wasteful expenditure. Unfortunately, the amount recovered to date remains minimal. Writing off billions without substantive investigations or recoveries does not restore public trust. This raises fundamental questions about whether municipalities view financial misconduct as a management failure or merely as another administrative exercise.

Systemic problems in Johannesburg

Johannesburg serves as a prime example of how these governance failures lead to declining service quality. The Auditor-General identified systemic issues such as poor revenue collection, infrastructure decay, weak preventative controls, and unreliable performance reporting. Despite repeated intervention, the city incurred R2.38 billion in unauthorized expenditure, continuing to struggle to meet key service delivery targets.

Against this backdrop, claims that Johannesburg is not facing a financial crisis are unfounded and cannot be sustained. The application of Section 216 of the Constitution is not taken lightly. The National Treasury's decision to suspend part of the equitable share reflects a serious breakdown in financial management and compliance with the Municipal Financial Management Act.

Accountability demands

The Democratic Alliance (DA) in Gauteng has consistently warned that repeated audit findings, deteriorating financial control, and a lack of consequence management would ultimately lead to this outcome. The latest Auditor-General's report confirms these warnings. Nevertheless, recommendations continue to gather dust, and their implementation remains painfully slow.

Now the evidence is undeniable. The question is no longer whether Gauteng municipalities have a financial problem; the question is who will be held accountable for it. Every rand lost due to financial misconduct is a rand taken away from road repairs, maintenance of water and electricity infrastructure, waste collection, and the provision of basic services that taxpayers deserve. Structures alone do not ensure accountability; political will is required.

Until consequence management becomes the norm rather than the exception, municipalities will continue to move from one financial crisis to the next, and it will be the residents who continue to pay for it through increased tariffs, deteriorating infrastructure, and disruptions in public services.