Nelson Mandela Bay faces ‘devastating’ loss of R542m in grant funding

Executive mayor of Nelson Mandela Bay Gary van Niekerk called an urgent 11th-hour meeting of his mayoral committee on 19 February – the day of a National Treasury deadline for the forfeiture of R542-million due to “severe underspending”.

While it is understood that an “action plan” was drawn up to avert this, no details of the plan have been made public. Despite several requests from Daily Maverick, Van Niekerk has yet to share the details.

Acting head of the Eastern Cape Department of Cooperative Governance Vuyo Mlokothi said on Tuesday that he had shared the letter from National Treasury with MEC Zolile Williams.

“As per the National Treasury letter, the municipality was given seven days to respond and make representations on why the intended withdrawal of the conditional grants must not be made final.”

He said Williams and the provincial finance MEC, Mlungisi Mvoko, were in talks with the National Treasury to avoid the forfeiture.

Treasury gave the municipality until 19 February to explain its plan.

Former executive mayor and the leader of the opposition in the Nelson Mandela Bay council, the DA’s Retief Odendaal, said it would be devastating should the grants be withdrawn.

It will “severely hamper the metro’s ability to provide even the most basic of services to certain areas of Nelson Mandela Bay, hamper the city’s ability to provide temporary employment opportunities through its Expanded Public Works Programme, and severely hamper the roll-out of critical infrastructure projects,” he said.

“What makes the rapid collapse of NMB so disturbing is that mayor Gary van Niekerk and his coalition puppeteers are wiping out the significant gains brought about by the previous coalition of good governance that saw the metro receive an unqualified audit – the first in 12 years.

“In addition, the city achieved the highest grant funding and capital expenditure in four years, leading to more and improved service delivery to all NMB residents. Unfortunately, this progress is now being undone by an incompetent and uncaring government,” Odendaal said.

The grants at risk include:

• The Urban Settlements Development Grant of R228.9-million. This is a substantial conditional capital allocation to metropolitan municipalities and is intended to upgrade informal settlements.


• A portion, R71.3-million, of the Informal Settlements Upgrading Partnership Grant, which will hamper the metro’s ability to provide services to residents who need it most.


• The city stands to lose R91-million of the Public Transport Network Grant, which is used to subsidise public transport.


• A portion, R689,000, of the Neighbourhood Development Partnership Grant that also relates to access to affordable public transport.


• The metro further stands to lose R120-million from the Regional Bulk Infrastructure Grant, which means major water and sanitation infrastructure projects run the risk of being compromised.

“This latest threat follows the withholding of grant funding and equitable share by the National Treasury at the beginning of the financial year.

“It is clear, however, that the metro is on a downward spiral with the current coalition, which will only mean more hardship and suffering for the people of Nelson Mandela Bay,” Odendaal said.

“We hope that Premier Oscar Mabuyane is equally concerned about the future of our metro and we therefore eagerly await an announcement in his State of the Province Address [to be delivered on Thursday] as to what measures the provincial government can implement to endeavour to stabilise the NMB administration.

Ongoing instability

The letter from the National Treasury was signed by Malijeng Ngqaleni, the deputy director-general for intergovernmental relations.

It includes a demand for a firm undertaking by the municipality that the allocated funds “are committed and that they will be fully spent by the end of the financial year, 30 June 2024, ie the commitment that the municipality will not request rollover against the funds proposed to be stopped.”

Ngqaleni said he intends to invoke the Division of Revenue Amendment Act which provides that the National Treasury may stop grant funding where there is “substantial underspending”.

The letter also makes it clear that the metro will lose R1.3-million of its funding for the Expanded Public Works Programme, which employs the poorest in communities.

One of the questions the National Treasury wants an answer to is why expenditure reported by the metro as of 31 December 2023 fell below 40% of allocated grant funding.

Van Niekerk, who is from the minority National Alliance but is kept in place as mayor by the ANC and the EFF, has twice suspended city manager Nxolo Nqwazi.

Nqwazi was arrested by the Hawks in September 2022 for her alleged role in the unlawful signing off on a R24-million tender for toilets to be installed in informal settlements. The tender – awarded during the pandemic-related National State of Disaster – was flagged by the Special Investigating Unit.

In October 2023, she was suspended after Finance Minister Enoch Godongwana demanded that steps be taken against her as a condition of further grant payments.

Read more in Daily Maverick: Bad governance: Finance Minister orders withholding of R781m in government grants to Nelson Mandela Bay

The metro’s chief operating officer, Christopher Dyani, stepped in as acting city manager but resigned after a fraud charge was opened against him. He was being investigated by the Hawks. It is alleged that he had committed fraud to secure a higher salary.

The former executive director of the metro’s electricity and energy directorate, Luvuyo Magalela, was then appointed acting city manager, but earlier in February, Nqwazi returned to the post as her suspension had lapsed. However, she was suspended again last week. So Magalela is once again the acting city manager.

The electricity and energy department is also being investigated by the Hawks.

The Nelson Mandela Bay metro has had three coalition governments since the local elections in 2021. The first was led by the ANC, the second by the DA and the third by an ANC-EFF coalition, which saw the National Alliance’s Van Niekerk becoming mayor.

Van Niekerk is also under investigation by the Hawks.

Read more in Daily Maverick: DA calls for Nelson Mandela Bay mayor to face disciplinary action while metro ructions continue

Impact on services

Jay Kruuse from the Public Service Accounts Monitor said conditional grants are ring-fenced public funds that can be spent only in specific areas.

“If the law and procedure for using such grants are not followed, then the funds can be withheld or must be returned to the National Treasury. In general, if a municipality does not have adequate capacity to plan for the use of conditional grants, then they will likely have to return such funds or they will underspend.

“We have seen how municipalities that don’t have adequate leadership and especially effective procurement processes, often result in delays in the appointment of contractors or a failure to properly appoint and manage contractors.

“Sometimes contractors are procured in good time, but then projects are delayed. The reasons for this can be numerous, including that the contractor does not have adequate capacity; there may be weather-related delays or payments that do not follow the initial schedules. So there may then be underspending and requests for grant funds to be rolled into the next financial year.”

He said from a perusal of the Auditor-General’s report, it was clear that this was a recurring problem for the metro.

The CEO of the Nelson Mandela Bay Business Chamber, Denise van Huyssteen, said the proposed stoppage of funds by the National Treasury due to the underperformance and noncompliance of the municipality was a major concern.

“This will directly impact on the ability of businesses to operate in an enabling environment and on service delivery to communities.

“In particular, we are concerned about how this will exacerbate the impact on the maintenance of electricity, water and sanitation infrastructure, especially given the underinvestment in these areas for some years.

“Due to the emergency nature of this matter, serious consideration should be given to the involvement of private sector experts in supporting the municipality in the effective monitoring of budget expenditure and the execution thereof.

“This should be directed at ensuring that budgets are spent timeously and in high-priority areas which impact both businesses and communities. It would, though, need to be subjected to strict governance criteria,” said Van Huyssteen.

Tukela Zamani from the Defenders of the People party said the stopping of the grants was a direct consequence of Van Niekerk’s inaction on critical issues that directly affected the institution’s ability to deliver services.

“I have sent numerous correspondence to raise such issues and not even one has been acknowledged, let alone acted upon. In the most recent, I describe the bureaucratic stagnation caused by his failure to provide leadership when suspended officials decided to return to work.

“This is a serious matter that is yet to receive the attention it deserves. How can we expect the municipality to function well when, at the helm of it, sits an incompetent man who is only concerned with self-aggrandisement?” DM