An examination of the factors contributing to high financial management consultancy fees: A case study of three local municipalities in South Africa

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 semistructured 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. The study concludes that although external consultants can offer specialised expertise, relying too much on them without institutional capacity building or skills transfer systems is problematic. To improve financial sustainability, it recommends implementing capacitybuilding initiatives, structured performance monitoring, and the implementation of transparent competitive procurement practices. The study contributes to a larger conversation on public financial management by offering practical strategies for enhancing internal financial governance in local government and optimising the use of consultants.