Short-changed — National Treasury threatens to halt more than a billion rand to Gauteng metros

Potholes along Campers Road in Sharonlea on 20 February 2023 in Johannesburg. It is reported that the South African National Roads Agency has disputed the claim that the country has 25 million potholes on its roads. (Photo: Gallo Images/Luba Lesolle)

By Nonkululeko Njilo

16 Feb 2024

Johannesburg, Ekurhuleni and Tshwane metros are in deep trouble, standing to lose billions in development allocation grants, which could be taken back to the national fiscus by the National Treasury as a result of poor expenditure.

Johannesburg, Ekurhuleni and Tshwane have all received a communique from National Treasury deputy director-general Malijeng Ngqaleni this week, stating its intention to stop conditional grants, and an instruction to submit written representations for poor expenditure within seven days.

Should the National Treasury forge ahead with the decision, the country’s richest metro, Johannesburg, will be the most affected as it stands to lose about R1.2-billion in conditional grants.

The National Treasury said it would stop grants for the programme and project preparation support grant, urban settlement development grant, the public transport network grant, informal settlement upgrading partnership grant, as well as the neighbourhood development partnership grant.

johannesburg broken city Potholes along Lilian Ngoyi Street in Johannesburg on 20 February 2023. (Photo: Gallo Images / Luba Lesolle)

Joburg - R1.2billion

Johannesburg City Manager, Floyd Brink, said upon receiving the letter, the city had conducted an analysis on spending for all the grants to date, and would be providing a comprehensive report to the National Treasury within the next two days.

“We want to assure our residents that a majority of the allocated funds have already been committed and contractors are currently working on approved projects in different regions of Johannesburg. These projects align with our Service Delivery Budget Implementation Plan.

“As part of our response to the National Treasury, we will outline the steps we are taking to expedite the completion of projects that are lagging behind, ensuring that all grant allocations are spent by the end of the financial year,” Brink said.

A collapsed road in the CBD along Bree Street on 20 July 2023 in Johannesburg. It is reported that at least 24 vehicles, mostly taxis, were damaged when the explosion occurred. (Photo: Gallo Images/OJ Koloti)

The City is in crisis, with electricity and water cuts now common enough to no longer make headlines. It has conceded that it has experienced a revenue collection crisis, mostly coming from the sale of water and electricity to residents.

The revenue collection crisis has negatively affected the delivery of services in several areas in the city.

The DA, which was relegated to opposition benches, said it hoped that the City would make a good case to the National Treasury to avoid a catastrophe.

“Should this stoppage happen, it would have a serious negative impact on service delivery, whilst we already have a service delivery crisis in the City.

“It’s for this reason that the DA Joburg caucus had remained adamant that the city should be transparent with the state of its finances,” said DA caucus leader Belinda Kayser-Echeozonjoku.

City of Ekurhuleni waste trucks. (Photo: City of Ekurhuleni)

Ekurhuleni - R600 million

Ekurhuleni, on the other hand, stands to lose more than R600-million.

The metro, a key contributor to the economy of Gauteng, was under the control of a DA-led coalition after the 2021 local government elections. In 2022, a marriage between the ANC, EFF and their allies saw a strong partnership and takeover of other metros, including Johannesburg, which the ANC lost to a DA-led coalition after the 2021 local government elections.

Ngqaleni said the Urban Settlement Development Grant, Public Transport Network Grant, and the Neighbourhood Development Partnership Grant would have their allocations affected.

“The National Treasury hereby informs you of the intention to stop an amount of R498.3-million from your 2023/24 USDG allocation of R1.2-billion, stop an amount of R73.6-million from your 2023/24 PTNG allocation of R773.2-million, and stop an amount of R35.2-million from your 2023/24 NDPG allocation of R216.9-million terms of section 18 of the 2023 DoRA.

The City’s spokesperson, Zweli Dlamini could not confirm the receipt of the letter and said he would check with the City manager’s office and finance department. City manager Imogen Mashazi, whom the letter was addressed to, could not be reached for comment at the time of publishing.

Of the three metros, Ekurhuleni is relatively well run, at least on paper. Its financial statements regularly get “unqualified” audits from the Auditor-General (AG) of South Africa, meaning that the financial statements contain no material misstatements.

Other than Cape Town, Ekurhuleni was the only SA metro to receive a clean audit in 2022/23. However, councillors now fear liquidity issues could cost the municipality its clean audit status — and coalition partners the ANC and EFF are on opposing sides of the debate, Daily Maverick reported.

Read more in Daily Maverick: Cracks continue to appear in ANC/EFF Ekurhuleni coalition over state of city's finances

Despite the possible withdrawal or stoppage of the grants, Ngqaleni said the decision would not in any way affect future allocations of any of the municipalities.

Torched City of Tshwane vehicles City of Tshwane vehicles were set alight, allegedly by disgruntled employees, in Pretoria West on 13 September 2023. (Photo: Felix Dlangamandla)

Tshwane - R600 million

Tshwane, home to more than four million residents, has been candid about its severe financial constraints. It stands to have more than R600-million taken back by National Treasury.

On Monday this week, the City set itself an ambitious goal of collecting an additional R1-billion a month for the next six months, from defaulting customers and businesses, as part of its financial rescue mission.

Similar to Johannburg, National Treasury said it would stop grants for the programme and project preparation support grant, urban settlement development grant, the public transport network grant, informal settlement upgrading partnership grant, as well as the neighbourhood development partnership grant.

Tshwane executive mayor Cilliers Brink said he was not oblivious of the seriousness of the decision and that the city would comply with an instruction to account for the poor expenditure.

“To be sure, we take this risk very seriously as we know that the national government is in a similar position as the City – in serious financial trouble – and is looking to claw back money from municipalities ahead of the finance minister’s budget speech.

“We will give a full account of our situation to the National Treasury and outline plans to spend our full capital allocation.”

Protracted municipal strike

Tshwane’s financial woes were further exacerbated by a four-month protracted municipal strike over salary increments. The strike led to the collapse of services including waste collection, attending to electricity and water outages, and fixing leaks, potholes and streetlights. It turned violent and 255 vehicles belonging to the city were torched.

Read more in Daily Maverick: Tshwane cuts defaulting customers' electricity in bid to stabilise finances, improve service delivery

The DA-led administration has often come under scrutiny from opposition political parties for deteriorated service delivery, with parties like the EFF suggesting that services are only delivered to affluent areas.

Responding to this, Brink said, “We know that service delivery in Tshwane is not where it should be. We have to be clear about that… The financial constraints in the city are among the key reasons why service delivery is not on par.”

Brink added his administration was aware that spending a full capital budget was essential to improving infrastructure for service delivery, especially to the poor.

“We are equally adamant that this spending must procure value for people's money, and not incur irregular, fruitless and wasteful expenditure,” said Brink.

The metros have since been requested to motivate to National Treasury on the following, among other issues:

Why expenditure reported as at 31 December 2023 is below 45 per%

Progress report against approved projects (provide list/names of approved projects)

Commitment that the allocated funds are committed and that they will be fully spent by the end of the financial year, 30 June 2024, i.e., commitment that the municipality will not request rollover against the funds proposed to be stopped. DM

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South Africa

Joburg - R1.2billion

Ekurhuleni - R600 million

Protracted municipal strike