The National Treasury has cracked down on Tshwane and Johannesburg by notifying both municipalities of its intention to cut a combined R1.83bn for grants, signalling that it is getting tough on errant municipalities ahead of 2024’s budget presentation.
In separate letters sent to the cities on Monday, the Treasury threatened to withhold payment due to underperformance and noncompliance with the Division of Revenue Act.
Tshwane is set to forfeit R630m, while Johannesburg could lose R1.2bn should the municipalities fail to provide reasons to the Treasury as to why the funds should not be withheld.
The two municipalities are SA’s largest and richest metros, with a combined budget of R127.8bn. However, both have been battling a breakdown of service delivery as their councils struggle to maintain infrastructure crucial to economic growth.
The metros are also governed through coalitions after the 2021 municipal elections failed to produce a clear winner. Johannesburg is run by a partnership of the ANC, the EFF and the Patriotic Alliance, while Tshwane is governed by a multiparty coalition comprising the DA, ActionSA, Freedom Front Plus, the IFP and the ACDP.
Some of the grants that are set to lose out on funding are for project preparation, urban settlement development, the upgrading of informal settlements, public transport and neighbourhood development.
The Treasury has given the cities seven days to provide reasons why it should not halt payments for the grants.
“National Treasury intends invoking section 18 [of the Division of Revenue Act] which provides that the National Treasury may in its discretion or on request of a transferring officer or a receiving officer stop the transfer of a schedule 4B or 5B allocation, or a portion thereof to a municipality if the National Treasury anticipates that a municipality shall substantially underspend on the allocation, or any programme, partially or fully funded by the allocation, in 2023/24,” the letter reads.
During the 2022/23 financial year, the City of Johannesburg’s revenue collection fell to 86%, translating into more than R500m of under-collection. The city expects the trend to continue in the current period.
In December 2023, the city conceded it was experiencing a revenue collection crisis, which mostly came from the sale of water and electricity to residents.
The city said the migration of 18,000 people to the city every month was placing a strain on its resources, which could not keep up.
In 2023 the council approved a R2bn loan from the Development Bank of Southern Africa to be used for operations, including its R900m monthly salary bill.
Tshwane mayor Cilliers Brink said in a statement: “We take this risk seriously. We know national government is, as [is] the city, in serious financial trouble and looking to claw back money from municipalities before the finance minister’s budget speech. We will give a full account of our situation to National Treasury and outline plans to spend our full capital allocation.
“We know spending our full capital budget is essential to improving service infrastructure, especially [for] the poor. We are equally adamant that this spending must procure value for people’s money and not incur irregular, fruitless and wasteful expenditure.
“Some of the delays in our capital projects have been caused by last year’s unlawful strike.
“Other delays are the result of tighter controls, a necessary response to the auditor-general. These controls are aimed at avoiding the waste of public money, including the payment of invoices not justified by the work done.”
The City of Johannesburg is still to comment.
Update: February 14 2024
This story has been updated with new information throughout.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.