Quality of governance and voting

AG reports and governance

Each year every state department is measured in terms of the extent they have adhered to the laws and regulations laid down with respect to accounting procedures, financial practice, asset control, awarding of contracts and so on. These assessments by the Auditor General (A) speak to the extent to which prescribed minimum standards of governance are met as they present a concise assessment of, inter alia, the levels of wastage and corruption in state departments. As they deliver a seemingly ``objective'' opinion of government performance and are an invaluable measurement of the potential effectiveness of state agencies. The AGs reports on municipal government are of particular interest as they indicate why service levels targets may not have been met, budgets went unspent or how much money was misappropriated or wasted.

Municipalities obtain "clean" audits by being able to demonstrate that they have systematically adhered to the regulations and legislation that govern their functioning. Being able to demonstrate this depends on several factors including the competence of accounting officers, the adequacy of IT and HR systems and presence of effective disincentives for financial abuse. Although service delivery depends heavily of local government performance it is at this tier of government that these factors tend to be least adequate. The MLGI Audit Barometer, for example, shows that 60 percent of local municipalities are substantially in breach of the prescribed regulations and legislation. Moreover, the more optimistic projections indicate that at the current rate of improvement it will be more than a decade before all local municipalities receive "unqualified" audits i.e. audits where substantial deviations from required practice cannot be identified.

Poor audit outcomes are often explained in terms of the lack of suitably qualified staff. The appointment of staff with the required technical competence and the ability to ensure conformance with prescribed policies is essential to achieving a positive audit. It would seem, prima facie, that large towns and cities would be best positioned to attract qualified staff. While this is manifest by most metropolitan municipalities achieving good audit outcomes the view is undermined by the fact that, of all the provinces, the largely rural KwaZulu-Natal local municipalities achieves the best audit outcomes. The MLGI Audit Barometer shows that 83 percent of local municipalities in that province routinely obtain unqualified audits. KwaZulu-Natal is closely followed by the Western Cape where 80 percent of municipalities get clean audits. By contrast in highly urbanised Gauteng 40% of the local and metropolitan municipalities do not routinely get unqualified audits. Similarly many remote rural rural municipalities like uMzimkhulu and Impendle obtain excellent audit outcomes. Obviously the inability to attract suitable personnel is not a key determinant of audit outcomes and reasons for the massive variations in audit outcome thus have to be sought elsewhere.

Voting patterns

In democratic electoral systems determining who fills key administrative positions depends on how much sway political parties hold in the constituency. Consequently elections play a pivotal role in determining who fills key position and, in turn, the quality of service delivery and the diligence with which the rules and regulations are adhered to. In the last local government election in 2011 the ruling party gained controlled of over 85 percent of the 234 local municipalities. Given the predominance of the ANC and the massive variation in the local government audit outcomes no obvious trend between voting patterns and audit outcomes is apparent.

An analysis of voting returns and audit outcomes for 2011/12 reveals that municipalities led by opposition parties (the DA, IFP, NFP etc.) received notably better audit outcomes than ANC led municipalities. On the face of municipalities in the opposition-controlled Western Cape are more likely to receive a positive audit than municipalities in other provinces. However, as indicated above, the best audit outcomes are in kwaZulu-Natal where 80 percent of the local municipalities are controlled by the ruling party. In that province there is little reason why IFP or NFP dominated municipalities should have better audit outcomes than ANC led municipalities. None of these municipalities boast the qualities that would predispose them to positive audit outcomes any more than ANC controlled municipalities in kwaZulu-Natal.

While opposition led municipalities do obtain better audit outcomes this does not seem to be the result of an opposition party being elected. Good audit outcomes are apparent in as many municipalities led by the ruling party. What a correlation between audit outcomes and voting returns does show is that any municipality dominated by a single political party predisposes it to poor audit outcomes. Conversely, not being dominated by a single political party systematically improves audit outcomes. The graphic below illustrates this. It contrasts the distribution of votes obtained by the wining party in

• municipalities that received an unqualified audit with
• those that received a qualified (or worse) audit.

It is clear that in those municipalities with qualified audits the winning party typically received about 75% of the total vote. In the vast majority of "qualified" audit municipalities the winning party received at least two-thirds of all votes cast in the 2011 local government elections.

By contrast the winning party in municipalities who got unqualified audits routinely received only about 55% percent of the votes cast. The area where coalitions are required as no one party gained an absolute majority are shown by the lightly shaded area. This shows that only a small percentage of municipalities run by coalitions receive qualified audits. It is seemingly strong political dominance by a single party at the polls that predispose the municipality to poor audit outcomes.

The general trend is:

• If a single party wins 90 percent of the vote that municipality has virtually no chance of getting an unqualified audit.
• If two-thirds of the population votes for one party then the municipality has less than a one-in-three chance of getting an unqualified audit.

This later situation approximates the current national situation where the ANC has 66% of the vote share and 30% of municipalities get unqualified audits. If the winning party in a municipality was to get a simple majority (50% of the vote) then the municipality has twice as much chance of getting an unqualified audit.

The kwaZulu-Natal experience in particular shows that audit quality is less influenced by which political party is elected and more by how much competition that political party faces. Moreover this trend bears out irrespective of which political party is dominant. This interpretation indicates that if the ruling party maintained control over the overwhelming majority of municipalities (say the current 85%) audit quality would be improved if its share of votes declined in those municipalities. The same goes for the opposition parties that win municipalities (but no opposition party has a share of votes that remotely approximates the ANC national share of votes).

This relationship indicates that the voters have much to do with audit outcomes and thus directly influence governance quality. However the result has less to do with changing which political party runs the municipality and more to do with ensuring that there is a healthy counter to political dominance. Having a strong opposition ensures greater scrutiny of activities and policies, improved transparency and, ultimately, better quality of governance. Voters can thus improve audit outcomes (and governance quality) even by voting for parties that have no chance of winning the election.

There has been a tendency for disaffected voters in South Africa to abstain from voting. However this results only is a race to the bottom as party performance in elections then depends on who loses the least number of supporters. This analysis shows that voters can improve governance quality by transferring their vote to another party - even one destined to lose. The one key question that has yet to answered is whether or not voters do in fact reward performance at the polls.