The Buffalo City Metro remains under severe financial pressure, with a debtors’ book of almost R10bn and widening electricity losses, despite signs of improvement in its overall financial performance.
The caution has been issued by an independent audit committee, an advisory body that provides impartial oversight of internal controls, risk management, financial reporting, and compliance for the city.
The metro’s financial strain is being driven by declining revenue collection, an increase in unpaid accounts by households, businesses and government departments, and persistent operational challenges — even as officials point to a modest turnaround in some key indicators.
Presenting the audit committee’s latest report to a special council meeting on Thursday, interim chair Wisdom Mushohwe said the metro’s finances were not “all doom and gloom” but cautioned that deep-rooted risks continued to threaten its long-term sustainability.
“The city’s biggest financial challenge remains the growing debtors’ book, which increased from R8.6bn to R9.7bn,” Mushohwe said.
Collection rates remain below the metro’s 78% target, averaging about 71% and placing sustained pressure on cash flow and liquidity.
The report paints a mixed picture of a municipality attempting to stabilise its finances while grappling with structural weaknesses in revenue collection, governance and service delivery.
On paper, there are signs of improvement.
Income increased from R5.3bn to R5.9bn compared with the same period in the previous financial year, though expenditure rose to R5.9bn.
The operating loss narrowed sharply from R300m to R47m, and after accounting for transfers and subsidies, the metro recorded a surplus of R317m — a marked improvement from the R127m deficit reported a year earlier.
But Mushohwe warned that these gains could be undermined if fundamental issues were not addressed.
Irregular expenditure remains above R10bn, requiring urgent intervention and stronger consequence management, while weak performance management systems and a lack of corrective action plans across several directorates continue to pose a risk to achieving a clean audit outcome.
“Persistent failure to meet performance targets, inadequate supporting evidence and the absence of corrective action plans represent a risk to the city’s ability to achieve an unmodified audit outcome,” he said.
Only 23% of performance targets were achieved during the period under review, raising concerns about year-end outcomes.
The metro’s risk profile remains largely unchanged, with slow implementation of mitigation measures and ineffective risk management practices compounding the situation.
Service delivery pressures are also feeding into the city’s financial difficulties.
Continuing vandalism of infrastructure, combined with limited resources to address the scourge, is affecting water and electricity services, as well as ICT network availability.
At the same time, a growing number of unresolved billing disputes — particularly related to water accounts — is discouraging residents from paying, further weakening revenue collection.
The audit committee raised concerns about the metro’s call centre capacity, noting that new queries were being logged faster than they were resolved, contributing to rising debt levels.
“The increase in water billing queries has a negative impact and creates a serious challenge for the city, with consumers ending up withholding payments,” Mushohwe said.
The electricity department remains a major source of financial strain.
The deficit in the division has grown significantly year on year, driven by electricity theft, rising technical losses and operational constraints.
Eskom’s revised billing model — which now charges across multiple points of entry — is adding an estimated R15m a month to the metro’s costs, placing additional pressure on already stretched finances.
While capital expenditure stood at 38% halfway through the financial year and grant spending showed some improvement, the audit committee flagged concerns around procurement deviations, overtime spending, asset management and the growth of irregular expenditure.
The effectiveness of internal controls and the internal audit unit also came under scrutiny, with capacity constraints leading to heavy reliance on external consultants.
A lack of consequence management was identified as another critical weakness undermining governance and accountability.
Despite these concerns, political leaders in the council broadly welcomed the report’s acknowledgement of incremental progress.
Finance portfolio committee head Yomelela Tyali said there was “willingness for improvement in the city, but more still needs to be done”.
ANC councillor Sakhumzi Caga said the improved financial position offered some relief and could help restore investor confidence but warned that weak revenue collection and slow resolution of billing queries remained serious concerns.
He called for the establishment of a dedicated “query war room” to fast-track the resolution of customer complaints.
Mayor Princess Faku also welcomed the report, saying while the positives were encouraging, significant challenges remained.
She urged the council to urgently fill vacancies in the audit committee to strengthen oversight and support efforts to improve audit outcomes.
DA councillor Geoff Walton said the party appreciated the constructive nature of the audit committee’s findings but cautioned that the underlying issues remained unresolved.
“The report highlights that internal audit findings are receiving more attention. That is welcomed,” Walton said.
“However, we note with concern that the audit action plan is not delivering what is expected and needed. Worrisome may be an understatement.”
He warned that the municipality continued to respond to audit findings rather than address their root causes, saying there was insufficient co-ordination among departments.
“It is now likely that the same, or substantially similar issues, will again be raised by the auditor-general, which could and should have been avoided had matters been dealt with earlier and in a strategic manner,” he said.
Walton also expressed concern that the metro’s improving financial position might not be sustained, particularly with significant cash outflows expected in the final months of the financial year.
“We are not convinced that the financial position at year-end will be much changed from the previous year, but would welcome being proved wrong,” he said.
He also flagged concerns around billing, particularly in respect of water accounts, and the lack of transparency regarding litigation involving the municipality.
The audit committee’s report makes it clear that without decisive action to improve revenue collection, strengthen governance and address service delivery failures, any gains made so far may prove difficult to sustain.
Daily Dispatch