Municipal employees, councillors, their relatives and broader public servants benefited from municipality contracts worth over R800-million between 2013 and 2014. This was revealed by auditor-general Kimi Makwetu in his latest local government audit report released on Wednesday.

Of the amount, the biggest chunk – R781-million – went to close relatives of employees and councillors. The trend was found by Makwetu at 100 of the municipalities and entities he audited over the period. South Africa audits 268 municipalities and 57 entities linked to some of them.

Among the municipalities fingered for this flouting of supply chain management regulation are three metros: Nelson Mandela Bay and Buffalo City in the Eastern Cape; Ekurhuleni in Gauteng and eThekwini in KwaZulu-Natal.

Supply chain management weaknesses, said Makwetu in the report, remain a major obstacle to local government’s ambition for a better life for citizens. Councillors and municipal employees are barred from doing business with the state, but the practice seems to not have abated, despite the Public Administration and Management Act (PAM Act) having come into effect in 2014.

The Act prohibits employees of government from doing business with the state. At its inception stage, the PAM Bill had proposed punishment that includes a one-year jail sentence, a fine and/or the cancellation of the tender in question. Because it applies to officials across the three tiers of government – who number over two million – its administration has always been seen as problematic by analysts. Makwetu’s team, however, reported back to the municipalities in which the flouting occurred.

“We tested whether the prescribed procurement processes had been followed to ensure that all suppliers were given equal opportunity to compete and that some suppliers were not favoured above others,” said Makwetu in the report. “We also focused on contract management, as shortcomings in this area can result in delays, wastage and fruitless and wasteful expenditure, which in turn has a direct impact on service delivery.”

The auditor-general further assessed the financial interests of employees and councillors of these municipalities, and their close relatives in suppliers to the municipalities audited. “We reported all the findings from the audits to the management of auditees in a management report, while only the material non-compliance findings were reported in their audit reports.”

Supply chain headache

About R31-million in expenditure was incurred in instances where employees or councillors knew of the conflict of interest but did not declare it, as required by law. More than half of the municipalities – 168 in total – engaged in uncompetitive or unfair procurement processes, while another 103 had inadequate contract management processes and a further 37 could not provide auditors with enough documentation to show what contracts are to be entered into.

Almost a third of municipalities could not provide auditors with evidence that the awarding of contracts had been made within the requirements of supply chain management laws.

Makwetu provided a provincial breakdown of progress made in the area of supply chain management, citing improvements in the Western Cape, Limpopo and Mpumalanga. KwaZulu-Natal, Gauteng and Eastern Cape regressed, although 23% of Gauteng’s auditees were found to have no findings on supply chain management issues.

The rest of the provinces – Free State, Northern Cape and North West were stagnant or showed little progress.

Back to basics

According to Makwetu, municipalities and entities that showed some improvement or maintained clean audits from the previous year had adopted a back-to-basics approach to governance. They were found to be engaging in tasks like:

  • introducing basic accounting and daily control disciplines
  • enforcing compliance with all legislation
  • employing  and  retaining  staff  in  accounting  and  financial  management  positions  with  the required level of technical competence and experience
  • allowing  the  chief  financial  officer  to  be  in  charge  of  the  financial  administration  function  and report thereon to the municipal manager

The Department of Co-operative Governance and Traditional Affairs (Cogta), welcomed the findings of the auditor-general.

“The report shows consistent improvement in almost all aspects of municipal audit outcomes,” said spokesperson Dumisa Jele. “It points to a steady trend towards good governance and sound financial management. This reinforces more efficient and accountable basic service delivery in line with the Back to Basics approach.”

“I acknowledge the role played by internal audit units, audit committees, councils, municipal public accounts committees and coordinating institutions through exercising their oversight responsibilities in improving governance of local government in these provinces,” Makwetu said.



Despite the PAM Act prohibiting municipal employees doing business with the state, they and their relatives still benefited to the tune of R781-million from municipality contracts issued between 2013 and 2014. This was revealed by auditor-general Kimi Makwetu in his latest local government audit report released on Wednesday.
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