Civil Engineering July 2021 | Vol 29 No 6

Le t ter from the ed i tor D espite a steady rise in the FNB/BER Civil Confidence Index between Q3 of 2020 and Q1 of 2021, the index fell from 21 to 13 (out of 100) last quarter. This is the result of several factors, including lower improvement in construction activity than anticipated, keener tendering competition, procure- ment delays and low demand for new construction. Respondents indicated that firms are having to price tenders more aggressively with narrower profit margins to secure work, and that the amount of time between tender closing dates and tender adjudication is increasing. According to Siphamandla Mkhwanazi, property economist at FNB, it is highly unlikely that, on an annual basis, construction activity will contract again in Q2 of 2021. However, he noted that, against expectations, the momentum in construction activity seen since Q3 of 2020 seems to have stalled and new construction demand remains elusive. This suggests that activity growth may be restrained over the short term. POOR LOCAL GOVERNMENT AUDIT OUTCOMES While the Covid-19 pandemic is undoubtably playing a role in the slowed rate of construction activity, the latest Auditor General (AG) report for local government paints a bleak picture. When releasing the local government audit outcomes for the 2019-20 financial year at the end of June, AG Tsakani Maluleke stated that, “Audit results under the outgoing administration have demonstrated little sign of improvement and we have observed the deteriorating state of local government.” Given that municipalities are responsible for a large portion of the country’s infrastructure development and maintenance, the declining state of local government is a major concern. When tabling the 2018-19 report last year, the AG delivered a very direct message that local government finances were under severe pressure and were not being managed as they should. Having warned that short-term solutions were not going to bring about the change needed, and were often costly and ineffective, the AG suggested several solutions. These included investing in preventative controls; significantly improving monitoring, review and oversight by senior officials, municipal leaders and councils; effecting consequences for accountability failures; and using the AG’s reports, briefings and engagements to identify key areas that need attention and would benefit most from implementing preventative controls. However, Maluleke reported that her office has not seen evidence of these messages being taken to heart. While there has been a net improvement, disciplined financial and performance management – which is key to achieving improved audit out- comes and service delivery – remains in a poor state. Local government finances remain under continued severe pressure as a result of non-payment by municipal debtors, poor budgeting practices and ineffective financial management. The financial position of just over a quarter of municipalities is so dire that there is significant doubt that they will be able to continue meeting their obligations in the near future. Almost half of the municipalities are exhibiting indicators of financial strain, including low debt recovery, an inability to pay creditors and operating deficits. Maluleke added that “local government loses billions of rands annually because of interest and penalties, which form a significant portion of the R3.47 billion of fruitless and wasteful expenditure reported in 2019-20.” The continued decline in local government impacts on service delivery which often fails the most vulnerable of South Africa’s citizens – the poor. PROFESSIONALISING THE PUBLIC SERVICE The AG urged provincial governments to work with municipali- ties with a focus on: Q Q Ensuring that leadership sets a tone of ethical and coura- geous leadership, service-orientation, good governance and accountability Q Q Capacitating and stabilising administration Q Q Enabling and insisting on a strong control environment with practical, automated and routinely executed internal controls that prevent financial loss, wastage and transgressions, and significantly improve financial and performance management and reporting Q Q Implementing swift, consistent and appropriate consequences for accountability failures. Much of this aligns with the drive to professionalise the public service. The goal is to build a capable, ethical and developmental state by changing individual attitudes, behaviour and perfor- mance towards serving the public. It is vital that South Africa speeds up this professionalisation drive if it is to improve service delivery, grow the economy and deliver infrastructure. If the situation is not timeously addressed and a capable, skilled, accountable and ethical public service not established, we may soon find ourselves in a very dire situation. Danielle Petterson Editor: Civil Engineering danielle@saice.org.za Civil Engineering July 2021 3 Professionalisation drive an urgent imperative Sentiment among civil contractors soured in Q2 of 2021, with many contractors dissatisfied with prevailing business conditions. This coupled with the declining state of local government is a cause for concern.