Factors Contributing to Limited Progress in Municipal Financial and Performance Management in South Africa

Abstract

This study examines the factors contributing to the limited progress in financial and performance management within municipalities in South Africa. A structured narrative literature review approach was used, and a thematic narrative synthesis approach was applied to analyze and organize the findings into main themes. The findings reveal a lack of performance in municipalities, which is contributed to by factors such as a lack of financial administration, a lack of skills, political interference, and poor oversight. The article further shows that together, these factors translate into more issues within municipalities as they contribute to corrupt activities, poor service delivery, and audit outcomes. These issues are mainly caused by non-compliance with legislation on financial and performance management in municipalities. This study identifies a nexus between financial and performance management, where funds given to municipalities must be effectively utilized for service provision, and performance systems are utilized to measure whether the funds attained the desired outcomes. This relationship has not been clearly established in previous studies. To address these issues, this study proposes strengthening capacity in municipalities based on merit principles, sound and strong oversight, and enforcement of compliance with the Municipal Finance Management Act (MFMA) and Municipal Systems Act (MSA). The findings further suggest that clear targeted performance, less political interference, effective accountability mechanisms, and consequence management are required. Municipalities can benefit from learning from benchmarking with other municipalities to improve their financial and performance management, attain clean audits, service delivery, and reach performance targets.