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Municipalities have to clean up their acts. If they don’t, post-Covid SA will explode

- William Gumede

Local governments must gather the political will to fight corruption, inefficiency as finances dwindle, but they’ll need help.

Covid-19 has unleashed a perfect storm of crises on South Africa’s ailing municipalities, combining existing inefficiencies, poor governance and corruption, with rapidly diminishing revenues.

As Covid-19 financial crisis bites, municipalities will see their revenues decline significantly, both their income from national government and local residents. Many municipalities receive their income largely from allocations from the national fiscus.

According to figures from Statistics South Africa, the economy contracted 51% on annualised basis in the second quarter of 2020, the three months through June. This is biggest downward cycle since World War II. The Treasury has forecasted a debt to GDP ratio of 81.8% this year, and the budget deficit to reach 14.6%.

The unemployment rate is expected to rise to 50% post-Covid-19. Business for SA forecast up to four million jobs could be lost. At least a third of formal businesses may go under because of Covid-19. The United Nations Development Programme in a recent analysis of the South African economy said Covid-19 may push around 54% households out of formal jobs into poverty.

Government’s Covid-19 stimulus package have not been deployed quickly, efficiently and imaginatively. This means that large numbers of business, jobs and opportunities had already been lost before they could access government Covid-19 relief.

Furthermore, the government’s lack of a clear economic recovery plan, a parallel economic policy pronouncements coming from the ANC which contradict public policy statements coming out of the Treasury and Reserve Bank and the return of power cuts undermine any quick economic recovery.

The battered economy, collapse of businesses and rising unemployment have reduced revenue for the national fiscus. To rein in public finances, austerity are being introduced, cutting budgets, reprioritizing spending. There will be less income from national revenue allocations for municipalities.

Many municipalities also depend on income from local residents and businesses. However, the Covid-19 financial crisis have now also cut the income municipalities can expect to generate from residents and businesses. Traditional municipal credit control measures will be largely ineffective because many residents will simply not have the income.

Most municipalities, lacking skills, plagued by corruption, mismanagement, and inefficiencies, are not fit for purpose to deal with the impact of the national, household and business crises on their operations.

The latest Auditor-General audit report, released earlier this month, said that only 21 municipalities received a clean audit in the 2018-2019 financial year. Over R32bn was lost in fraud and corruption, and R11bn on unauthorised expenditure during the financial year. There are high incidents of irregular expenditure at the majority of municipalities.

The Auditor-General cited lack of financial controls and project monitoring; supply-chain mismanagement and material noncompliance with legislation. There is an ongoing culture of a lack of accountability, impunity and tolerance for transgressions.

But the impact of Covid-19 on municipalities will not only be financial, it will also bring social and political crises. The mass business closures, rising joblosses and public finance austerity will no doubt change the country’s political mood. We are likely to enter a new era where citizens will be more demanding for public service delivery.  Yet, municipalities will have less revenue for service delivery, infrastructure and maintenance.

There will be more citizens’ scrutiny of government decisions, appointments and tenders. There will be more protest of non-delivery, wrongdoing and corruption. Outrage against callous elected and public representatives will be more robustly and violently expressed. Furthermore, there will be rising, rather than less, expectations from citizens for municipalities to deliver.

Given the fact that many may lose homes, we may see more landgrabs, the rise of informal settlements, and rates, utility and service payment boycotts. Covid-19 may also herald in a sea-change in local politics. It is very likely that the next local elections will unseat many current sitting councilors and mayors, seen as to be too ineffective, corrupt and uncaring.

Municipalities must gather the political will to tackle corruption, inefficiency and mismanagement – or face coming violent protests, boycotts and being unseated in the next local government elections. They need to fix the financial, governance and human resources failures. They must ramp up accountability.

Most municipalities lack capacity because appointments to critical positions, contracts and development programmes are often made based on nepotism, political connectedness and party affiliation, rather than on competency. This need to stop.

Municipalities need to be more responsive to citizens. And use limited resources more efficiently. They will need to make catalytic investments, whether in infrastructure, new development projects and programmes. Where possible, neighbouring municipalities should explore shared services with each other.

They must use citizens, communities and civil society organisations more to provide services, maintenance and oversight. The media, civil society and citizens must monitor municipal services – and municipalities must be responsive to criticisms, complaints and protests.

Municipal Integrated Development Plans are either absent or obsolete now. Municipalities must become more investor friendly to attract investments. This will mean cutting red tape, operating honestly and ending corruption. They should focus on encouraging on building clusters of industries – whether expanded current ones or searching for new ones, based on their endowments.

Building local recycling economies and which almost everything is re-used, fostering community cooperatives and social enterprises so that communities can produce for themselves, and establishing community-based renewably energy producing initiatives offer many new opportunities to municipalities.

Municipal social pacts, which are agreements between social partners, whether government, business, organized labour or civil society, at the local level, to jointly solve a development, social or economic problem should be considered. The perfect storm of crises that Covid-19 brings to municipal economies cannot be solve by municipal governments alone – it needs the partnership of business, civil society and local communities.

William Gumede is Associate Professor, School of Government, University of the Witwatersrand; and author of Restless Nation: Making Sense of Troubled Times (Tafelberg)

This is an edited extract from a presentation to the South African Local Government Association (SALGA) and Wits School of Governance webinar on the Impact of Covid-19 on Municipal Economies, 18 September. This extract has been published in the Sunday Times.