Two mismanaged Free State municipalities on brink of collapse

The Mangaung and Masilonyana municipalities in the Free State are on the brink of financial collapse, with the auditor-general (AG) warning that essential services like water, sanitation, and refuse removal are at serious risk due to persistent governance failures. 

Presenting the AG’s report to parliament’s standing committee on public accounts (Scopa) on Tuesday, Odwa Duda, business unit leader at the AG, said the root problem across the two municipalities was the absence of accountability, with no improvement in sight. 

“When there’s poor performance or wrongdoing, no action is taken, and this contributes to continued decline. For example, a municipality like Masilonyana has not submitted its financial statements, which reflects a breakdown in accountability,” Duda said.

Mangaung metropolitan municipality in Bloemfontein was slapped with a qualified audit opinion, mainly due to material misstatements, noncompliance with financial regulations, and a staggering R1.9bn in irregular expenditure.

Deputy business unit leader in the AG’s office, Sue-Ellen Steenbok, also flagged R130m in fruitless and wasteful spending. 

“Debt collection remains a major challenge, with over R5.6bn owed to the municipality,” she said. “The inability to collect revenue has negatively impacted the municipality’s cash flows and its ability to pay creditors on time. This has led to an increase in overdue accounts and further strained the municipality’s financial position.”

The metro failed to recover 80% of its debt, R194m in conditional grants were underspent and National Treasury withheld R297m due to slow project rollout. 

Duda said there were deep-rooted operational problems in Mangaung

“They still have significant challenges with skills and capacity. There’s a lack of co-ordination between the project management unit and other units within the municipality, which is why the projects they implement are often unsuccessful or incomplete,” he said. 

Despite repeated warnings, Mangaung had made little progress in addressing poor planning and delayed infrastructure projects.

Steenbok said: “The metro’s leadership instability has created an environment of uncertainty and weak oversight, making it difficult to implement necessary reforms. The municipality’s poor financial health, compounded by a growing debt burden and shrinking revenue base, has significantly reduced its capacity to deliver basic services.”

Masilonyana municipality received a disclaimer because the AG could not form an opinion due to missing or unreliable records.

Duda said Masilonyana’s budget was chronically underfunded, and its cash reserves were depleted, making it difficult to cover even basic operating expenses.

AG audit manager, Gregory Coetzee, said: “Treasury has raised concerns about the municipality’s failure to align its budget with realistic revenue projections, deepening its financial crisis.”

Duda said the municipality had received disclaimed audits for several years.

The municipality had spent R112.4m irregularly and R5.6m on fruitless expenditure. Additionally, R174.4m in conditional grants were underspent due to poor grant management and delays in projects, while National Treasury withheld R19.1m.

“The reason for these repeat disclaimers is that they have no plans in place to address poor record-keeping,” Duda said. “What’s even more concerning is that when we compare 2022/23 with 2023/24, their situation has actually worsened. Masilonyana is a municipality that lacks discipline in terms of accountability.”

The AG’s findings of the two municipalities painted a grim picture to the portfolio committee.

“If these were businesses, they would be liquidated and closed down,” said committee member Alan Beesly. “Their assets, if they have any, would be sold, and people would move on. Unfortunately, that’s not the case; there are people living there who deserve basic service delivery. I can’t see physically how these municipalities can ever recover.”

Committee member Helen Neale-May said the Masilonyana municipality had normalised dysfunction. 

“To think that for nine consecutive financial years, it has inherited a disclaimer of audit opinion from the AG. This is not merely a failure of administration, it is a complete collapse of financial accountability, transparency, and ethical leadership.

“This points to a municipality that has normalised dysfunction,” she said. “They speak to leadership that is either incapable, unwilling, or indifferent to the constitutional obligations it bears to the people it serves.”

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