The Impact of High Financial Management Consultancy Fees in South African Local Government

Abstract

This study examines the factors of high financial management consulting fees in three local governments in South Africa: Chief Albert Luthuli in the province of Mpumalanga, Greater Letaba and Lephalale in the province of Limpopo. Local government's increasing reliance on external consultants has sparked concerns about increasing costs, a lack of skill transfer, and ongoing financial mismanagement. The study, which is informed by agency theory, participatory budgetary theory, and new public management theory, investigates how poor governance, a lack of internal resources, and faulty procurement procedures influence municipal financial sustainability and service delivery while driving consultancy expenditure. A multiple-case study design was employed in a qualitative research approach underpinned by an interpretivist philosophy. Data was collected through document analysis and semi-structured interviews with municipal officials. The findings revealed that inadequate oversight procedures, political interference, inconsistent procurement procedures, and a lack of internal financial expertise are the primary contributors of excessive consulting costs. Furthermore, a lack of accountability and efficient performance monitoring increases reliance on consultants, compromising sound financial management and governance.