The Auditor-General’s 2024/25 consolidated report on local government delivers a finding that should unsettle comfortable assumptions about South Africa’s cities. Not a single metropolitan municipality achieved a clean audit. Five metros now carry qualified audit opinions, up from only two at the start of the sixth administration. Water losses across the eight metropolitan municipalities totalled nearly R10 billion, electricity losses exceeded R17 billion, and the average creditor payment period reached 121 days.

The dominant explanation for the failure of local government in South Africa has long been that many municipalities are simply too small, too poor and too administratively fragile to function effectively. This remains a persuasive explanation for many of the country’s 257 municipalities and continues to inform debates about municipal consolidation. However, the metro findings point to a different governance challenge.

The resource paradox

Metropolitan municipalities are constrained not primarily by a lack of resources. Together, they manage R336 billion, representing 54% of local government expenditure, and serve nearly 25 million people. They possess the institutional and financial capacity expected of large urban governments, yet continue to experience serious governance failures. The explanation therefore lies beyond resources alone.

It would be wrong to suggest that South Africa’s metropolitan municipalities are uniformly failing. The Auditor-General records meaningful differences in performance. The City of Cape Town, eThekwini and the consolidated City of Johannesburg received unqualified audit opinions on their financial statements. Cape Town and eThekwini also demonstrated good financial health. These outcomes show that stronger financial management is achievable.

Uneven progress masks systemic weakness

However, these improvements make the report’s broader conclusion more, rather than less, significant. Despite these positive outcomes, no metropolitan municipality achieved a clean audit, and five metros now carry qualified audit opinions, up from only two at the start of the sixth administration. A qualified audit opinion is not a minor technical shortcoming. It means the Auditor-General found that parts of a municipality’s financial statements were materially misstated, or that sufficient evidence could not be obtained to verify them, raising concerns about the reliability of the financial information used for oversight and decision-making.

Every metro also received material findings on compliance with legislation. In other words, even where financial reporting improved, weaknesses in governance, procurement, infrastructure management and accountability remained entrenched.

What the Auditor-General’s report describes is a gradual weakening of accountability under conditions of organisational complexity. Only a third of municipal public accounts committees function effectively. Audit committees continue to produce reports that management fails to implement, whilst councils receive reports documenting persistent underperformance without taking meaningful corrective action. The accountability ecosystem remains intact but is becoming increasingly ineffective.

When complexity shields failure

This illustrates what economists describe as a principal-agent problem. As organisations become larger and authority is distributed across multiple decision-makers, responsibility becomes more difficult to identify and enforce. In a small municipality, governance failures are visible and immediate. In metropolitan municipalities, they become dispersed, procedural and easier to defer. Managers are insulated by layers of delegation, whilst mayors and councils can formally discharge their oversight responsibilities without imposing meaningful consequences. The formal architecture of accountability remains intact, but the incentives required to activate that architecture have steadily weakened.

The report documents the persistence of these governance failures, but it cannot, by itself, establish why they endure. One plausible explanation is that organisational complexity disperses responsibility in ways that weaken accountability. As authority is distributed across multiple political and administrative actors, responsibility becomes increasingly difficult to assign and enforce.

Although there are important differences between metros, coalition governance in some councils appears to have intensified existing weaknesses associated with administrative instability, political appointments and weak consequence management. Under these conditions, accounting officer appointments may increasingly reflect political accommodation rather than administrative merit, whilst investigations may be delayed rather than concluded promptly. The Auditor-General records recurring instability in accounting officer positions, high vacancy rates in senior technical posts and persistent delays in resolving material irregularities, without seeking to explain the political dynamics that may produce these outcomes.

The report also provides an important window into the growing consultant economy within local government. Consultants undoubtedly have a legitimate role where specialist expertise is required. The concern arises when repeated dependence substitutes for building permanent institutional capability.

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Political practice trumps institutional design

The deeper question raised by the report concerns the relationship between formal institutions and political practice. Metropolitan municipalities possess the institutional architecture expected of accountable governance. They have audit committees, internal audit functions, municipal public accounts committees, professional administrations and well-developed financial management systems. However, successive audit outcomes suggest that institutional design alone cannot guarantee accountability. Formal oversight structures remain necessary, but their effectiveness ultimately depends on the incentives operating around them.

One interpretation of the evidence is that metropolitan governance may be experiencing the progressive subordination of formal accountability institutions to informal political arrangements. Strengthening accountability therefore requires more than tighter audit processes. It requires institutional arrangements that protect oversight structures from political bargaining, strengthen consequence management and preserve the independence of accountability institutions. Without that shift, successive audit reports are likely to document the same governance failures because the institutional incentives that produce them remain largely intact.

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