The National Treasury aims to rope in external experts to help draft the financial recovery plan (FRP) for distressed municipalities, with service delivery in most parts of the country including economic centres having worsened over the years.
The poor state of local government finances have also been a drag on Eskom’s balance sheet, with councils owing the utility more than R94bn.
The Treasury’s municipal debt programme has failed, with only 11 of the 71 municipalities that signed up for the programme paying their accounts on time.
The Enoch Godongwana-led department flagged the well-documented poor state of affairs at most of the country’s about 257 local councils.
The bidding document, calling on entities with experience in turning around municipalities to form a panel into which the government can tap for expertise, states 43 municipalities were in a financial and service delivery crisis in 2022, and that preliminary indications are that the number will exceed 50 municipalities.
The document further highlights 96 municipalities that passed unfunded budgets for the 2024/25 financial year and 129 for which conditional grants were withheld due to failure to spend the grant within the 2023/24 financial year, as some of the headwinds facing local government.
The department is adjudicating the bid.
“The overall objective of this assignment is to assist the Municipal Financial Recovery Service (MFRS) unit in preparing FRPs for municipalities in financial distress or in financial crisis. The number and frequency of FRPs to be developed will depend on the number of requests received from provinces,” the bid document reads.
“Upon receipt of a request, the MFRS unit will evaluate the request and if approved, a request for quotation will be submitted to all successful bidders on the panel.”
The preparation of the FRP will only take place once the status quo assessment is completed, with the consultants expected to use the information in the status quo assessment report to identify the potential solutions available to the municipality to improve its financial and service delivery performance.
The bid document states that in developing the FRP, the experts must identify the main areas contributing to the crisis in the municipality and outline the principal strategic objectives of the plan, identify human and financial resources needed to assist in resolving financial problems and where those resources will come from among other objectives.
The consultants are also expected to provide for special measures to prevent unauthorised, irregular and fruitless and wasteful expenditure and other losses, and to undertake a financial modelling exercise to determine the possible period of recovery and to identify targets against which performance will be measured during the intervention.
The usage of municipal procured consultants had made little difference in improving their financial standing and thus their ability to deliver services.
Auditor-general Tsakani Maluleke has previously said that municipalities using consultants to prepare financial statements were not getting long-term value for money.
To ensure the panel it intends to appoint for three years is fit for purpose, the Treasury said measures will be put in place for performance management.
“Supplier performance management is viewed by the National Treasury as a critical component of the preparation of financial recovery plans to ensure value for money and realistic and practical FRP’s are developed that will progressively assist the municipalities to recover from their financial crisis and failures in the provision of adequate basic services,” the document states.
“Once a project is allocated, the bidder will be required to conclude a service level agreement (SLA) with the National Treasury. The SLA will serve as a tool to measure, monitor and assess the performance of the service provider and ensure effective delivery of the services, quality and value-add to the core business of the Treasury,” it reads.
“If the successful bidder does not reach consensus on the SLA, the said service provider will with immediate effect cease to be on the panel.”
Operation Vulindlela 2.0 has zoomed in on improving the performance of local government, targeting reforms in areas such as water and electricity service delivery and municipal administration.
The government is expected to publish an updated White Paper on Local Government by March next year after it said the prevailing 1998 policy did not adequately address issues facing municipalities.
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