By Thebe Mabanga
Municipalities that have had their equitable share withheld by National Treasury will need to address unfunded budgets, put in place a payment plan to key creditors and show how they will reduce wasteful expenditure.
This is according to the National Treasury, which briefed the media on Wednesday after announcing that 69 municipalities have had R13, 5 billion of equitable share for July suspended due to failure to comply with the Municipal Finance Management Act (MFMA).
The withheld amount represents about 12% of R110 billion on total equitable share allocation.
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The municipalities include the City of Johannesburg (CoJ), which has had about R 3,5 billion withheld. The CoJ’s situation is particularly precarious as the city is said to have between five and 17 days cash flow cover.
Of particular concern for the city is its impact on its credit rating, which last week was spared a downgrade by Moody’s and had its outlook kept positive.
Treasury’s deputy-director general for intergovernmental relations, Ogalaletseng Gaarekwe, said at the press briefing that the municipalities fall into three categories, each with its own remedy.
The first are those with unfunded budgets. These will have to undertake not to table any unfunded budgets. This would require amending their adjusted budgets, tabled in the last quarter of the municipal final year.
The next category is those municipalities who owe Eskom and water boards substantial amounts. Gaarekwe says these municipalities will have to submit credible repayment plans signed by the creditor agency and will have a third of the withheld funds released specifically for the payment of the debt, before the rest of equitable share will be paid.
The last category is those municipalities who have failed to contain or reduce unauthorised, irregular, fruitless and wasteful expenditure. These municipalities are required to submit a plan of how they will reduce this. Some of the affected municipalities had failed to reduce this over the first half of the year, even after being warned in December last year.
This means that the municipalities can, on paper at least, address challenges and have funds released within the month.
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National Treasury said it does not expect the measures to impact service delivery as municipalities have revenue raising capacity of about R500 billion, much higher than that of provinces.
The South African Local Government Association (SALGA) said that although it “acknowledges measures being taken to promote sound financial management and accountability across all spheres of government to strengthen governance, financial discipline, and public confidence, it must be pointed out that the local government sector continues to face structural and systemic fiscal challenges that require urgent support and reform.”
“Any withholding of equitable share must balance compliance objectives with the impact on service delivery.”
SALGA said that municipalities are owed substantial amounts by national and provincial departments, suggesting this was not taken into account when the final decision was made.
Last year this time, Treasury withheld funding for 75 municipalities and earlier this year had threatened to withhold from 99 municipalities before the final tally of 69 was decided on.
