How Joburg set fire to your money

If you’re looking for a case study of a city that can only be described as financially feral, look no further than the City of Joburg. It’s annual accounts for the year to June 2024, released recently, are objectively wild.  

Take the R9.02m legal claim from a woman who fell into a theatre orchestra pit in 2016. Or the R4.5m claim for the poor sod whose elevator plunged from the fifth floor to the basement of the Joburg Property Company’s Proton House in 2017.

There are fed-up residents who took legal action to try and make the Joburg Roads Agency, the city, or even the mayor, comply with their duty to fix the damaged drain covers in Saxonwold. There’s the city employee who’s apparently been waiting for his leave payout since 2012. And the poor unfortunate who’s claimed R450,000 in defamation damages for an article on the city’s website.

On the plus side, some kind soul bequeathed a property in France to City Parks. That value is not yet known, so who knows if it’s enough to offset an alleged nonpayment of taxes to the South African Revenue Service by the division in 2020/21.

God bless the notes to the annual financial statements, where most of this untamed accounting took place.

There are some utterly infuriating numbers for the year ended June 2024. Start with the losses the city incurs in its service delivery: electricity losses cost the ratepayer R4.93bn, and water losses R2.9bn (with a massive R2.1bn of that lost to leaks).

Then consider the gap between what you fork out for utilities versus what the city pays for bulk purchases. 

For electricity, the city has a markup of 10.8% – which in round numbers is R1.8bn – while for water, it is 11.9% – or R1.13bn. In theory, this markup should be used to maintain the infrastructure; in practice, given the parlous provision of these services, it’s clear precious little of this cash is going there. 

There’s also some pretty impressive “UIFW” – a delightfully benign acronym for unauthorised, irregular, and fruitless and wasteful expenditure. 

For just 2023/24, the city clocked up R8.98bn in unauthorised expenditure. It’s a monstrous amount, considering the budget was R80.9bn. A chunk of that was debt impairment from poor revenue collection, but it also comes from city units simply blowing through their budgets – which is, you’d think, indicative of a city flirting with fiscal disaster.

For irregular expenditure, the number came in at a stratospheric R3.5bn-plus – including, apparently, for irregular contracts, deviations from supply chain management processes, noncompliance with the Municipal Financial Management Act (MFMA), bidders who didn’t meet tender specifications and “emergency procurement”. Just imagine how many municipal bills have to be paid to fill that hole in “irregular” spending; no wonder the city is hiking its rates like it’s going out of fashion.

By comparison, fruitless and wasteful expenditure came in at a relatively restrained R325.8m.

Stating the obvious

Turn to the annual report – the auditor-general (AG) report in particular – and things are just as untamed. 

For a start, the AG points out that all that unauthorised, irregular or fruitless and wasteful spending hasn’t been investigated. (The city itself notes an investigation backlog extending back to 2010.)

As a result, as the AG recently told parliament, the city tends to write off 42% of irregular expenditure, while a chunky 58% is simply not dealt with; 93% of fruitless and wasteful expenditure is not dealt with. Just last year, the council wrote of billions in UIFW.

But if you really want to take a closer look at the financial mismanagement and incompetence that’s turning our “world class African city” into rubble, look no further than the AG’s report on material irregularities.

For a start, there’s the many multimillions paid for fire engines and rescue vehicles in 2019 that weren’t delivered. By the time the company that provided those vehicles went into liquidation, only 12 of 20 bought had been supplied. The city is now looking to claw back R62.5m.

The issue? Apparently the responsible official didn’t take adequate steps “to ensure that the system of financial management and internal control is carried out diligently”.

Or, as a News24 article reported, an internal investigation by the city in 2020 alleged the nub of the issue was negligence, contravention of the MFMA, irregular conduct in approving invoices, an irregularly awarded contract, a contravention of the constitution, and financial misconduct. That’s some laundry list of incompetence.

But what do you think the penalty was? A final written warning valid for 12 months, forfeiting of 10 days’ salary, and not being eligible to act in a higher position for a year. Which means, if you break all those rules, you’re still eligible for promotion 12 months down the line. As far as setting the bar low on consequence management goes, it’s the gold standard. 

The AG now considers the fire engine matter resolved. The city has put in a claim for the missing eight vehicles with the liquidator, and the authorities have taken the remedial step of establishing “an inspecting team that will inspect and confirm delivery of vehicles before procurement payments are made”. Which, in any reasonable world, should have been the case all along.

Government-by-hindsight

Then there are the two cases of the city in 2018/19 investing cash with a foreign bank that didn’t qualify as a bank under the Banks Act – a contravention of the municipal investment regulations. Both cases have been resolved, with the city withdrawing the full R2.1m and R1.2m, including interest. 

Amazingly, the city then gravely pledges that in future, only investments in banks registered in terms of the Banks Act will be tabled for approval. As if this was such an epiphany.

Oh, and there’s also the 2019 case of the missing data. According to the report, the city is on the hook for R3.46m for data and airtime that it bought and didn’t use. Now Joburg is trying to claw that money back from the service provider, which is, unsurprisingly, pushing back.

Again, in an utter no-brainer, the city said it will prevent a recurrence by establishing a “contract management committee” to oversee contracts and ensure all goods and services received are used. It’s also developed a monthly checklist for contract management.

There’s also the fact that the city between July 2019 and February 2023 paid maintenance and support for software licences that weren’t used. That’s no small-change – the city has so far been able to recover R228.4m from the service provider and has been given credits to the value of R53m. 

That software situation, you’ll be glad to learn, has been resolved. Again, in future, the city commits to only paying for maintenance and support on existing licences that are in use. Now that’s a plan so cunning you could, as Blackadder would say, put a tail on it and call it a weasel.

And that, right there, is the problem with the City of Joburg. 

Its solution to its material irregularities – putting in place the most basic oversight measures – is just so obvious. This isn’t proactive administration; it’s government by hindsight. And it is indicative of the cavalier attitude of city officials to other people’s money.

If these are the candid admissions of failure from the city, the reality is no doubt much worse. What’s sorely lacking is a workable plan – an implementable vision of how to turn things around. Without that, the city is destined to continue its descent.