Treasury’s threat to metros
PRESSURE: MUNICIPALITIES GIVEN SEVEN DAYS TO JUSTIFY WHY MONEY SHOULDN’T BE WITHHELD
Tshwane explains why it has been underperforming.
With only a day to go before Finance Minister Enoch Godongwana delivers his budget speech, it has become known that National Treasury has notified several municipalities that it will withhold millions of rands in conditional grants earmarked for defined projects.
This comes against a backdrop of lower-than-expected tax collections and a myriad of spending demands in an election year.
Apart from the R630 million Tshwane may lose, the City of Joburg may lose an eye-watering R1.1 billion, Ekurhuleni R607 million and Nelson Mandela Bay R523 million.
The letter to Tshwane was published on the social media platform X a week ago by former ANC caucus leader in Tshwane Dr Kgoši Maepa, who is now working in the office of Gauteng premier Panyaza Lesufi.
Maepa did not say anything about the other two metros in the province finding themselves in the same predicament.
He did, however, also “disclose” on the social media platform that Tshwane mayor Cilliers Brink is about to resign.
To which Brink promptly responded: “Dear Dr Mampara – I am going nowhere. The last candidate you fielded in Tshwane was an unrehabilitated insolvent.”
Brink said the real issue here is that national government does not have money and is now trying to retain some of the amounts agreed upon with local governments.
The municipalities have been given seven days to respond to the letter, dated 12 February, with a list of information National Treasury requires and give reasons why the quoted amount should not be withheld.
They must also indicate what amount they consider appropriate to withhold.
‘Money not being spent’
National Treasury said in the letters, which Moneyweb has seen, that Joburg and Ekurhuleni had spent less than 45% of the grants by the end of last year, which is three quarters into the municipal financial year, and Tshwane and Nelson Mandela Bay had spent less than 40%.
The City of Tshwane said in a statement on Sunday that it made “an elaborate, detailed and comprehensive submission about how it intends to spend its grant funds allocation before the end of the current financial year”.
It said it informed National Treasury that it has developed recovery plans to ensure accelerated expenditure of the grant funds and explained what had contributed to unsatisfactory performance up to 31 December last year.
The key factors are:
Migration from an old financial management system to the new financial management system, which impacted on processing and accounting for expenditure;
The reduction of the urban settlement development grant (USDG) and informal settlement upgrading partnership grant (ISUPG) during the second quarter as directed by National Treasury, which necessitated early review and repackaging of a number of programmes to accommodate the cuts; and
The prolonged unprotected labour strike which impacted heavily on the implementation and monitoring of projects.
According to the city, these factors have been resolved.
Tshwane municipal bonds suspension threat
In the meantime, the City of Tshwane is awaiting the response of the JSE, which earlier threatened to suspend the trading of its municipal bonds unless the audited financial statements are submitted by the end of this month.
The initial deadline for the 2022-23 statements was 31 January.
Such a suspension may constitute an act of default and entitle bond holders and other financiers to call up the loans granted to the metro.
Brink said newly appointed chief financial officer Gareth Mnisi went to see the relevant people at the JSE and explained that the city is trying to rebuild and improve its systems after the shock adverse audit opinion from the auditor-general a year ago.