Treasury threatens to pull funding from Tshwane

The City of Tshwane is on the verge of forfeiting R630m allocated for the funding of various capital grants to the National Treasury due to the metro’s underperformance and noncompliance with the integrated urban development grants.

The Treasury on Monday threatened to pull the funding unless the cash-strapped municipality explains why its expenditure of conditional grants allocated was below the 40% threshold required by December 31 2023.

Tshwane was allocated R2.3bn in conditional grants for the 2023/24 financial year.

In a letter to municipal manager Johann Mettler, dated February 12, which Business Day has seen, Malijeng Ngqaleni, deputy director-general of intergovernmental relations in the Treasury, warned of the Treasury’s intention to stop a portion of the 2023/24 allocation to the municipality regarding the Programme and Project Preparation Support Grant, Urban Settlement Development Grant, Public Transport Network Grant, the Informal Settlements Upgrading Partnership Grant and the Neighbourhood Development Partnership Grant as gazetted in the 2023 Division of Revenue Act “due to underperformance of the grant allocation(s)”.

Ngqaleni demanded that the city account for the failure to use the funds. The metro has seven days from February 12 to explain why the funding should not be halted considering that expenditure reported from December 31 was below 40%, contravening section 18 of the Division of Revenue Act .

“National Treasury intends invoking section 18 of [the 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,” Ngqaleni said.

Ngqaleni, however, said the decision would not affect future allocations to the municipality.

The Treasury move follows a warning by the JSE to the city that its debt-raising instruments could be suspended should it not provide the local bourse with financial statements.

Government entities such as state-owned enterprises and municipalities issue bonds or debt on the JSE to raise money for large projects such as building roads and other critical infrastructure meant to improve service delivery.

But failure to abide by the listing requirements could cause their instruments to be suspend

ed, dealing a blow to their reputation in the capital markets.

The JSE said if the municipalities “still fail to submit their financial information by February 29, their programmes and the listing of their debt securities may be suspended”.

On Monday, Tshwane mayor Cilliers Brink conceded that the metro’s finances were in disarray and in need of “rescue”. The city, which recently experienced a three-month strike that ended in November last year, plans to recoup R23.3bn over the next six months from its debtors to stabilise its finances.

“If we succeed, we’ll improve our cash flow, our Eskom account as well as our credibility and creditworthiness. This also buys us the time to fix problems with tariffs and to achieve better value for money in supply chain management. If we do not succeed, we will have to make a number of fundamental changes to the way we deliver services by the end of June 2024 when a new budget must be adopted,” Brink said.

“The city’s tariffs do not cover our expenses to deliver services, in part because those costs are too high. Our costs are, in turn, affected by factors like the productivity and compensation of our employees and the value we receive from tenders.”

Brink said the city had applied to the National Treasury for debt relief. “Such debt relief will be a game changer, but we are not basing our plans on this application being successful.”

Tshwane spokesperson Selby Bokaba said the city was “in the process of submitting a detailed motivation to the National Treasury with a view to presenting an acceleration plan on how funds will be spent”.