Apply the agency theory to the relationship between municipalities and water tanker mafias. Which answer correctly identifies the principals, the agents, the agency problem, and the governance mechanism that has failed?

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Answer

Principals: residents. Agents: municipal officials. Agency problem: officials exploit their position for personal gain instead of acting in the public interest. Failed governance mechanism: independent oversight of tender processes.

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Principals: national government. Agents: municipalities. Agency problem: municipalities are too independent. Failed mechanism: the PFMA.

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Agency theory only applies to companies and cannot be applied to municipalities.

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Principals: the Auditor-General. Agents: municipal councils. Agency problem: councils do not follow audit recommendations. Failed mechanism: parliamentary oversight.

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Principals: water tanker companies. Agents: municipal procurement officials. Agency problem: officials accept bribes. Failed mechanism: the tender system.

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Apply the agency theory to the relationship between municipalities and water tan...

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