Mathjabeng in financial freefall

Auditor-general Tsakani Maluleke has outlined how embattled ANC-led Mathjabeng Local Municipality ANC-led Mathjabeng Local Municipality incurred a deficit of R871.6 million for the financial year, with total liabilities exceeding assets by R5.8 billion.

Maluleke’s report, dated 11 February 2026, covers the period from 1 July 2024 to 30 June 2025. She issued unqualified audit opinion on the municipality because the lack of reliable supporting data prevented her office from verifying several critical figures. 

Only 61% of the municipality’s planned targets were achieved even though it had spent 117% of its budget during the reporting period.

The municipality owes Eskom more than R1.58bn and Vaal Central Water more than R6.84bn. Both accounts are long overdue.

“Note 47 to the financial statements indicates that the municipality incurred a deficit of R871 618 930 during the year ended 30 June 2025 and as of that date, the municipality’s total liabilities exceeded its total assets by R5 879 577 803. The municipality also owed Eskom R1 586 717 577 (2024: R848 602 951) (debt relief portion: R5 250 339 733) (2024: R5 250 339 733) and Vaal Central Water R6 841 210 884 (2024: R5 841 839 566),” Maluleke’s report stated.

Regarding service charges, the auditor general was unable to confirm R1.28bn in water and electricity revenue because the municipality relied on estimated billing instead of consumption data.

On bulk purchases, electricity and water losses totalling more than R723 million could not be verified because units sold were not accurately tracked.

Debt impairment — money owed to the municipality that is unlikely to be recovered — exceeded R6.7bn.

Maluleke’s report also identified multiple errors in the reporting of net cash flows from operating and investing activities, while there was insufficient evidence for R135.6m in changes to net assets.

The report further raised concerns about the municipality’s ability to continue operating and flagged financial mismanagement, including unauthorised, fruitless and wasteful expenditure.

Unauthorised expenditure amounted to R946.3m, reflecting money spent beyond the approved budget. A significant portion of the R151.7m in fruitless and wasteful expenditure consisted of interest and penalties incurred because the municipality failed to pay its creditors on time.

Irregular expenditure amounted to R95.8m and stemmed from non-compliance with supply chain management requirements.

Maluleke noted that the municipality failed to investigate most of the irregular and unauthorised expenditure to determine liability or hold officials accountable.

Among the municipality’s major service delivery failures were pothole patching, sanitation and electricity infrastructure. Only 12% of the pothole patching target for the west region and 8% for the east region was achieved.

With regard to sanitation, only 14% of household and business waste removal backlogs were addressed within 48 hours, against a target of 100%.

For electricity infrastructure, only 13% of the work on a new substation was completed against a target of 70%.

The report also detailed several material irregularities. One involved a revenue consultant who was paid R253.6m based on a percentage of revenue that auditors found the company did not generate, as the revenue originated from pre-existing government property valuations.

The report stated that in September 2018, the municipality appointed a consultant as a revenue investigator and collector for 24 months — from 15 October 2018 to 14 October 2020.

On 6 July 2020, the accounting officer informed the consultant that the municipality intended extending the appointment on a month-to-month basis until a new service provider was appointed.

“The month-to-month appointment continued until February 2025, when the contract was terminated by the municipality,” the report stated.

In February, during a visit to the municipality, sources in Mathjabeng told the Mail & Guardian about the contract, although the mayoral spokesperson denied such an agreement existed.

The sources alleged that contracts in the municipality were being awarded to companies linked to senior ANC leaders in the province, contributing to a lack of accountability. 

“The appointment of the consultant was not on a time-and-cost basis and was based on a percentage of the money collected on behalf of the municipality, which was stated as follows in the service level agreement: ‘The contract monetary value shall be for the sum which will amount to 25% of collected monies on behalf of municipality. This amount is inclusive of VAT,’” the report said.

“The accounting officer therefore did not take all reasonable steps to ensure that the resources of the municipality are used effectively, efficiently and economically, as required by section 62(1)(a) of the MFMA [Municipal Finance Management Act].”

According to the report, information obtained from the municipality showed that the consultants’ work mainly involved the revaluation of properties owned by the Free State department of public works and infrastructure, which were listed on the municipality’s valuation roll. 

Auditors found no evidence of other revenue-enhancement activities. 

“From the appointment date until 7 June 2024, the municipality paid a total amount of R253 609 346.73 (VAT inclusive) to the consultants, based on revenue directly received by the municipality from the department for assessment rates and municipal services.

“The non-compliance is likely to result in a material financial loss for the municipality if the municipality’s resources are not utilised in an effective, efficient and economical manner.”

Another irregularity involved “ghost infrastructure”. 

In one case, R7.2m was paid for an attenuation dam that was never constructed.

On 12 April 2017, the municipality awarded a R13.7m contract for the construction of the Nyakallong stormwater system. Two variation orders totalling R3.26m were  approved in 2017 and 2019.

Payments estimated at R7.2m were made for the attenuation dam after the consulting engineer certified the work as complete.

However, during a site visit, auditors found the project incomplete. The attenuation dam had not been constructed, the contractor had abandoned the site and the work performed was substandard.

“This contravened section 65(2)(a) of the MFMA, as an effective system of expenditure control for the approval and payment of funds was not maintained. The overpayments made on the project are likely to result in a material financial loss for the municipality if not recovered,” the report said.

The accounting officer was notified of the material irregularity on 5 May 2020 but failed to provide sufficient evidence of corrective action.

“On 9 June 2021, I referred the material irregularity to the Directorate for Priority Crime Investigation (DPCI) for investigation, as provided for in section 5(1A) of the PAA. 

“The referral was acknowledged by the DPCI on 23 June 2021.”

The investigation was later completed and handed to the National Prosecuting Authority, resulting in the arrest of a municipal official and two representatives of the service provider. 

Their first court appearance was in July 2023. The case has been postponed several times. 

“The trial was set to commence in May 2025 but was provisionally withdrawn from the court roll to consider and consult on further evidence. 

“To date, the matter has not been re-enrolled on the court roll. I am following up with the National Prosecuting Authority on the progress of this matter.”

The report also highlighted what Maluleke described as an environmental collapse at the Henneman, Phomolong and Witpan waste-water treatment works, which have allegedly “totally collapsed”, leading to the discharge of raw sewage into the environment and groundwater systems.

Maluleke said the Henneman wastewater treatment works was no longer operating effectively, resulting in the ongoing spillage of untreated sewage into the surrounding environment, including groundwater, the Rietspruit and connected watercourses.

The municipality, he said, had failed to take reasonable measures to prevent pollution and environmental degradation, as required by the National Environmental Management Act and the National Water Act.

“The discharge of raw or untreated sewage into the environment is likely to cause substantial harm to communities exposed to and dependent on the contaminated water resources.

“The accounting officer was notified of the material irregularity on 7 December 2022. The accounting officer did not take appropriate action to resolve the material irregularity. 

“On 27 February 2024, I referred the material irregularity to the Department of Water and Sanitation (DWS). The referral was accepted by DWS on the same day and the investigation is currently in progress.”

The Phomolong and Witpan wastewater treatment works face similar problems.

Treasury has withheld R7.3m of the municipality’s equitable share allocation due to its failure to repay unspent conditional grants.

“As disclosed in note 16 to the financial statements, the municipality materially underspent the conditional grants by R76 326 709 (2024: R74 598 566). 

“As disclosed in note 28 to the financial statements, the National Treasury withheld R7 305 000 (2024: R20 007 000) equitable share from the municipality due to an arrangement with the National Treasury for the repayment of unspent conditional grants.”