Financial Management Challenges Persist in South African Municipalities
The latest Municipal Finance Management Act (MFMA) compliance report released by the Finance Ministry shows that unauthorized, irregular, fruitless and wasteful expenditure (UIFWE) climbed to R268.13 billion in the 2024/25 financial year, up from R264.1 billion the previous year. This increase underscores ongoing weaknesses in fiscal discipline across many local authorities.
Supply Chain Management Remains a Pain Point
The report highlights that non‑compliance with supply chain management regulations continues to be a recurring issue. Many municipalities have either failed to update their procurement policies or have not revised them at all, leading to repeated irregularities such as over‑priced contracts and unnecessary consultancy spend.
Auditor General of South Africa findings cited in the MFMA report note that inadequate policy evolution weakens internal controls and opens the door to fruitless spending.
Delegation Systems and Governance Gaps
Only 127 municipalities, or 49 %, reported having functional delegation systems in place during 2024/25. Delegation frameworks are essential for clear accountability, timely decision‑making, and effective service delivery. Their absence in more than half of the municipalities contributes to the fragmented governance environment described by the Finance Ministry.
Cost Containment Shows Mixed Results
On a more positive note, the number of municipalities with updated cost containment policies rose from 161 to 170, delivering collective savings of R5.06 billion. The savings were driven mainly by reductions in consultancy fees and related overheads.
However, the report warns that overspending on overtime remains a significant risk, pointing to weaknesses in payroll management and internal controls. Reliance on consultants continues to be high in several communities, eroding the gains made through cost containment.
Consequence Management and Disciplinary Action
The MFMA compliance report also tracks the state of consequence management. While the number of municipalities with disciplinary committees increased to 178, the Ministry of Finance expressed concern over three declining indicators:
- Fewer allegations of financial misconduct are being reported.
- The number of cases investigated has dropped.
- Fewer officers are facing disciplinary action.
The Ministry suggests these regressions may stem from delayed initiation of proceedings, weak enforcement of existing policies, or a limited understanding of disciplinary processes among local officials.
Ministerial Intervention Signals Growing Impatience
Finance Minister Enoch Godongwana’s recent directive to Johannesburg Mayor Dada Morero to halt a R10.3‑billion wage increase deal illustrates the national government’s decreasing tolerance for unaffordable fiscal commitments. The minister emphasized that the city could not sustain the proposed salary hike without jeopardizing service delivery.
Such interventions are intended to reinforce accountability and prompt municipalities to align spending with realistic revenue projections.
Looking Ahead: Priorities for Improvement
To reverse the trend of rising UIFWE, the Finance Ministry recommends that municipalities focus on:
- Strengthening delegation and decision‑making frameworks.
- Regularly reviewing and updating supply chain management policies.
- Implementing robust internal controls over payroll and overtime.
- Enhancing consequence management by ensuring timely reporting, investigation, and sanctioning of financial misconduct.
- Building capacity within treasury units to monitor consultant engagements and ensure value for money.
By addressing these areas, local authorities can improve financial integrity, restore public trust, and better deliver essential services to South African communities.
