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Nelson Mandela Bay has lost R430m in National Treasury grants due to underspending

Nelson Mandela Bay has lost R430m in National Treasury grants due to underspending
Estelle Ellis
By Estelle Ellis
10 Apr 2024
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Severe underspending saw the Nelson Mandela Bay metro losing R430m in grant funding, with the leader of the DA in the metro predicting that its financial situation would deteriorate further in the next financial year

National Treasury’s decision to cut another R171.9-million in grant funding from the Nelson Mandela Bay Municipality’s budget brings the total of lost grants in the metro to R430-million for the past year. 

The blow was considerably softer than anticipated after Treasury in February indicated its intention to take away R542-million, which included a considerable part of the Expanded Public Works Programme. 

Retief Odendaal, the leader of the Democratic Alliance (DA) in Nelson Mandela Bay, predicted that the metro’s financial situation would, however, deteriorate further in the next financial year, as it had only spent 37% of its total capital budget with just one quarter remaining in the current financial year. 

“The latest available statistics on capital expenditure show only a marginal 8% increase from February 2024. This means the metro has only one quarter left to spend almost half its budget,” he said on Wednesday.

“Should the slow expenditure rate continue, the metro is bound to forfeit even more millions at the end of the financial year as National Treasury has a ‘use it or lose it’ approach to conditional grant funding.”  

Read more in Daily Maverick:  Nelson Mandela Bay faces ‘devastating’ loss of R542m in grant funding


Governance issues


The metro is currently headed by its third city manager in a year, Luvuyo Magalela, who is filling the position in an acting capacity. Magalela addressed a letter to National Treasury in February explaining the reason for underspending. 

The first issue he highlighted was the withholding of grants from the administration after Finance Minister Enoch Godongwana relayed his concerns over governance issues in the city. 

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

Godongwana wanted the council to overturn the appointment of the Mandela Bay Development Agency (MBDA) CEO, Anele Qaba, and suspend the city manager, Dr Noxolo Nqwazi.

Nqwazi was suspended but is fighting to be reinstated. She was arrested by the Hawks in October 2022 for her role in the allegedly unlawful signing-off of a R24-million tender for toilets in informal settlements. The tender was awarded during the pandemic-related National State of Disaster.

On Tuesday, the Eastern Cape Division of the High Court in Gqeberha set aside Qaba’s appointment, ruling that it was unlawful and irregular. On Wednesday, Qaba said he intended to appeal against this ruling.

Late approval


Magalela told National Treasury the metro had struggled with the late approval of business plans by municipal departments. This, coupled with the late release of grants, severely curtailed spending, especially of the Urban Settlements Development Grant. The metro has now lost close to R100-million of this grant.  

It also lost R689,000 of its Neighbourhood Development Partnership Grant, specifically aimed at marginalised communities. 

The National Treasury removed R10-million from the Programme and Project Preparation Support Grant. Magalela vaguely explained in his letter that the reason for underspending in this programme (only 6.4% of the grant had been spent by December) was due to “supply chain management processes commencing”.

The Urban Settlements Development Grant is meant to upgrade infrastructure and municipal services. Only 27.9% of this grant had been spent by December.

Magalela wrote that the causes of underspending of this grant included delays in the approval of business plans, long lead times to deliver equipment, especially for upgrading electricity infrastructure, contractual “challenges” and slow invoicing.

He said “high-value activities” were planned for the latter part of the financial year. With only a few months to go, the current spending of this grant is only 20% higher than in December at 48%.

The metro lost R689,000 of its Neighbourhood Development Partnership Grant, which aims to develop marginalised communities by providing social and economic opportunities to residents. Magalela said they had “challenges” with their implementing agent, the MBDA.

The metro also lost R48-million of its Informal Settlements Grant. Magalela said the first problem with this grant was that the budget was incorrectly captured for the Economic Development, Trade and Agriculture programme and reflected as an operating budget instead of a budget for capital expenditure. 

This resulted in the department failing to implement its programmes. He said they had bought two tractors for R2.7-million. The electricity programme under this grant was delayed by wrangling over the extension of a contract that has since been resolved. 

Land acquisition


Delays of two entities in selling their properties hit the land acquisition portion of this programme. 

Road projects under this grant were ongoing. Magalela said there were problems with expenditure on sanitation and the budget of the public health programme under this grant was incorrectly captured. These issues had been partially resolved. 

Because of supply chain management issues, the metro lost R10-million from its Programme and Project Development Grant. 

The biggest loss to the metro — a total of R246-million — is to its Public Transport Network Grant, with the latest amount withheld by the Treasury being R96-million. The metro’s bus system last operated in 2023 but it has been snagged in controversy, criminal investigations and legal action since 2018.

In February 2023, the metro ended its contract with the operator, claiming non-compliance but the operator, Spectrum Alert, said the metro owed it millions.

Magalela said key procurement issues to get the buses back up and running would be sorted out. DM

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