R629m blow to City of Tshwane
NON-COMPLIANT: NATIONAL TREASURY TO CUT GRANTS DUE TO UNDER PERFORMANCE
The JSE plans to suspend the metro’s listed bonds unless it complies.
On the same day Tshwane mayor Cilliers Brink vowed to get the metro out of its deepening financial crisis by improving collections by R1 billion per month, National Treasury informed city manager Johann Mettler of its intention to cut the payout of conditional grants by R629 million. That is equal to about a quarter of the city’s capital budget.
In July, the council approved a total budget of R46.9 billion, with R44.5 billion for operating expenses and R2.4 billion for capital projects. The drastic move by treasury, which will devastate the metro’s financial recovery efforts, is motivated by “underperformance/non-compliance” with regard to five conditional grants.
The five grants are for:
► Project preparation;
► Urban settlement development;
► The upgrading of informal settlements;
► Public transport; and
► Neighbourhood development.
In a letter dated 12 February, National Treasury deputy director-general Malijeng Ngqaleni informed the metro that it has seven days to respond to the notice.
It must provide:
► Reasons why expenditure reported as at 31 December 2023 is below 40%;
► A progress report against approved projects;
► Representation on the cash coverage for grants transferred;
► Representation on the initial cash flow projections against actual performance;
► A progress report on any approved rollover for the 2022/23 financial year; and
► Representation on all projects awarded after the second quarter of the municipal financial year as at 31 December 2023.
City spokesperson Selby Bokaba said on Tuesday afternoon the city is in the process of submitting a detailed motivation to the treasury with a view to presenting an acceleration plan on how the funds will be spent.
“We’re hopeful and optimistic that upon presenting the acceleration plan, they will review their intention to withdraw our grant funds.”
Mayor Brink said the city is taking this risk very seriously.
“We know that national government is, like the city, in serious financial trouble, and is looking to claw back money from municipalities ahead of the finance minister’s budget speech [next week].
Eskom debt
The notice from National Treasury comes on the back of news that Tshwane’s Eskom debt had escalated to almost R3.9 billion at the end of January. Its debt to trade creditors escalated to R12.6 billion at the end of June last year. To add insult to injury, the JSE warned the metro to submit its financial statements for the previous financial year by the end of February or face the suspension of its municipal bonds listed on the exchange. The city has further been paying off a multi-billion rand tax debt to the South African Revenue Service in crippling monthly payments due to earlier underreporting on valueadded tax.