Metros 'regress' as audit outcomes reveal weak financial discipline and service delivery failures

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Auditor-general Tsakani Maluleke has warned that South Africa's local government remains in a concerning state, with limited progress made by the outgoing administration to strengthen governance and improve service delivery. She was speaking as she tabled the 2024-25 General Report on Local Government Audit Outcomes in parliament.

Maluleke said that over the past four years, mayors and councils have made limited progress in this area, with residents and businesses continuing to experience unreliable services, environmental hazards and deteriorating infrastructure. Municipal financial health also worsened under their watch.

Only 39 municipalities, or 15% of the total, achieved clean audits. They collectively administered R52.60 billion, just 8% of the total local government expenditure budget. A further 38 municipalities, representing 24% of the local government budget, have regressed since 2020-21. This group includes municipalities that previously had clean audits and three metros.

None of the country's eight metros received clean audits during 2024/25

The audit outcomes of South Africa's eight metros continued to decline in 2024-25, with not one achieving a clean audit. Maluleke said this shows that good governance fundamentals are not in place at the municipalities that serve close to 24.9 million people, around 40% of the population. Metros and their entities are responsible for services to 8.9 million households, 46% of all households in the country, and they manage R335.97 billion, or 54%, of the total local government expenditure budget.

The number of metros with qualified audit opinions rose over the term of the administration from two to five. Cape Town, eThekwini and the consolidated group for the City of Johannesburg received unqualified opinions with findings, meaning their financial statements were credible. However, Johannesburg's separate financial statements, without its municipal entities, dropped to a qualified opinion. The other five metros received qualified opinions due to weaknesses in their reporting, poor record-keeping and weak internal review processes.

Maluleke also reported material findings on performance reporting at all metros except Cape Town and Ekurhuleni, largely due to weak systems and manual, error-prone processes. Material findings on compliance with key legislation were reported at every metro.

Persistent non-compliance by metros and their entities over the four years of the administration caused irregular expenditure of R73.87 billion, with R23.14 billion of that incurred in 2024-25 alone. About 77% of this was due to non-compliance in procurement and contract management. Maluleke said this points to a lack of institutionalised controls to ensure leadership and officials behave ethically and avoid conflicts of interest.

Financial distress widespread

The picture across local government as a whole was equally troubling. Only 35% of municipalities were assessed as being in good financial health, while 40% were rated as concerning and 25% as unfavourable. More than half of all municipalities, 123 in total, did not have enough current assets to cover what they owed, and 174 municipalities did not have enough cash to pay their creditors.

Budget credibility also deteriorated. In 2024-25, 116 municipalities, or 45%, adopted unfunded budgets, committing to R288.17 billion in spending they had no way of funding. A total of 177 municipalities (69%) incurred R36.05 billion in unauthorised expenditure during the year, taking the cumulative total since 2021-22 to R118.13 billion.

Some positive signs

Despite the overall decline, Maluleke pointed to a few encouraging trends. The number of municipalities with repeat disclaimed audit opinions is now at its lowest in years, and 61% of municipalities received unqualified opinions, a level last reached in 2015-16. Timely submission of financial statements reached 98%, the highest on record, with only two outstanding audits compared to ten the year before.

Maluleke credited these gains to better support from national and provincial government and stronger oversight from parliament and provincial legislatures, but said the improvements need to be doubled and replicated across the accountability system.

Call for action

Maluleke repeated her call to the ministers of finance and cooperative governance to direct sustained, structural solutions for metros. She said the scale of underperformance, ongoing governance failures and billions of rand in irregular expenditure demand systemic involvement from every roleplayer in the accountability system.

"Well-functioning metros are essential to South Africa's inclusive urban growth, social stability and sustainable development," she said. "They are expected to demonstrate exemplary service delivery performance owing to their broader revenue bases and better capacity."