Auditor-general flags R103.75m shortfall and soaring losses at Thaba Chweu municipality

Thaba Chweu local municipality recorded a R103.75 million deficit for the financial year, the auditor-general’s recent financial health data shows, adding to multiple red flags about the municipality’s ability to meet its obligations.

Key financial shortfalls and creditor delays

The auditor-general found that the municipality spent R103.75 million more than it generated during the financial year. Over the past two years the municipality took an average of 263 days to pay creditors, far exceeding the less-than-30-day period required by legislation.

The AG also reported that about 99% of municipal debt was unlikely to be recovered, and that more than 50% of the following year’s budget had already been spent in previous years.

High utility losses and Eskom liability

Thaba Chweu disclosed R59.5 million in water losses in its annual financial statements, described as 48% of all water flowing through municipal pipelines. It also disclosed R161.9 million in electricity losses, equivalent to 50% of electricity units distributed.

Municipal spokesperson Ezrom Sekgobela said electricity distribution losses were currently at 52%, compared with a norm of 10%. He attributed cash-flow constraints in part to these excessive distribution losses.

The municipality’s outstanding Eskom liability stands at R2.2 billion. Sekgobela said R95 million on the Eskom account represented interest charged because the municipality could not finance the current account.

Steps to address the Eskom debt and budget ratios

Sekgobela said council had taken steps to partner with Eskom through a Distribution Agency Agreement. He said the agreement would restructure the debt into a non-current liability to allow the municipality to present a funded budget and would freeze interest charges during the partnership. The partnership, he said, aims to reverse distribution losses and optimise the electricity trading service.

The total operating budget approved by council was R1 billion. Sekgobela said actual employee costs stood at R280 million, compared with R272.9 million the previous financial year, and that councillors’ remuneration amounted to R13 million.

The municipality reported an operational budget ratio of 26% for 2025-26 and a projected 29% for 2026-27, both within the 25% to 40% norm cited under the Municipal Finance Management Act Circular 71 ratio calculations.

Service and governance pressures

The auditor-general’s findings cover the municipality that includes Lydenburg, Mashishing, Sabie, Graskop and Pilgrim’s Rest. Sekgobela denied allegations that the municipality was overstaffed but said organisational realignment must be prioritised so the municipal structure complies with the prescribed design matrix.

When asked about an allegation that a person who collapsed beside a road died because an ambulance was unavailable at the Thaba Chweu Disaster Management Centre, Sekgobela referred the matter to the health department and noted that provision of ambulances is the health department’s responsibility. He described disaster management as an unfunded mandate for Thaba Chweu and said funding concerns had been escalated to the district municipality and National Treasury.

What the auditor-general highlighted

• R103.75m deficit for the financial year
• 263 days average to pay creditors over two years
• R59.5m water losses (48% of water)
• R161.9m electricity losses (50% of distributed units)
• R2.2bn Eskom liability
• Operational budget ratios of 26% (2025-26) and projected 29% (2026-27)

The auditor-general’s findings and the municipality’s responses together paint a picture of constrained finances, high utility losses and a large Eskom debt that the municipality is seeking to manage through partnership and restructuring measures.