Incompetency could lose half a billion for Nelson Mandela Bay
The Eastern Cape city’s mayor is scrambling to stop Treasury enforcing its ‘use it or lose it’ rule, after only 40% of allocated grants were used. By
Executive mayor of Nelson Mandela Bay Gary van Niekerk called an urgent 11th-hour meeting of his mayoral committee on 19 February – the day of a National Treasury deadline for the forfeiture of R542-million because of “severe underspending”.
Although it is understood that an “action plan” was drawn up to avert this, no details of the plan have been made public. Despite several requests from Daily Maverick, Van Niekerk has yet to share the details.
Acting head of the Eastern Cape Department of Cooperative Governance Vuyo Mlokothi said he had shared the letter from the National Treasury with MEC Zolile Williams. “As per the National Treasury letter, the municipality was given seven days to respond and make representations on why the intended withdrawal of the conditional grants must not be made final.”
He said Williams and the provincial finance MEC, Mlungisi Mvoko, were in talks with the Treasury to avoid the forfeiture. The Treasury gave the municipality until 19 February to explain its plan.
The former executive mayor and leader of the opposition in the Nelson Mandela Bay council, the DA’S Retief Odendaal, said it would be devastating should the grants be withdrawn.
It will “severely hamper the metro’s ability to provide even the most basic of services to certain areas of Nelson Mandela Bay, hamper the city’s ability to provide temporary employment opportunities through its Expanded Public Works Programme, and severely hamper the roll-out of critical infrastructure projects,” he said.
“What makes the rapid collapse of Nelson Mandela Bay so disturbing is that mayor Gary van Niekerk and his coalition puppeteers are wiping out the significant gains brought about by the previous coalition of good governance that saw the metro receive an unqualified audit – the first in 12 years.
“In addition, the city achieved the highest grant funding and capital expenditure in four years, leading to more and improved service delivery to all Nelson Mandela Bay residents. Unfortunately, this progress is now being undone by an incompetent and uncaring government,” Odendaal said.
The grants at risk include:
The urban settlements development grant of R228.9-million. This is a substantial conditional capital allocation to metropolitan municipalities intended to upgrade informal settlements.
A portion, R71.3-million, of the informal settlements upgrading partnership grant, which will hamper the metro’s ability to provide services to needy residents.
The city stands to lose R91-million of the public transport network grant, which is used to subsidise public transport. A portion, R689,000, of the neighbourhood development partnership grant that also relates to access to affordable public transport.
The metro further stands to lose R120-million from the regional bulk infrastructure grant, which means major water and sanitation infrastructure projects run the risk of being compromised.
“It is clear ... that the metro is on a downward spiral with the current coalition, which will only mean more hardship and suffering for the people of Nelson Mandela Bay,” Odendaal said.
Continuing instability
The letter from the National Treasury was signed by Malijeng Ngqaleni, the deputy director-general for intergovernmental relations.
It includes a demand for a firm undertaking by the municipality that the allocated funds “are committed and that they will be fully spent by the end of the financial year, 30 June 2024, i.e. the commitment that the municipality will not request rollover against the funds proposed to be stopped”.
Ngqaleni said he intends to invoke the Division of Revenue Amendment Act, which provides that the National Treasury may stop grant funding where there is “substantial underspending”.
The letter also makes it clear that the metro will lose R1.3-million of its funding for the Expanded Public Works Programme, which employs the poorest in communities.
One of the questions for which the National Treasury wants an answer is why expenditure reported by the metro as of 31 December 2023 fell below 40% of allocated grant funding.
Van Niekerk, who is from the minority National Alliance but is kept in place as mayor by the ANC and the EFF, has twice suspended city manager Noxolo Nqwazi.
Nqwazi was arrested by the Hawks in September 2022 for her alleged role in the unlawful signing off on a R24-million tender for toilets to be installed in informal settlements.
The tender – awarded during the pandemic-related National State of Disaster – was flagged by the Special Investigating Unit.
In October 2023, she was suspended after Finance Minister Enoch Godongwana demanded that steps be taken against her as a condition of further grant payments.
The metro’s chief operating officer, Christopher Dyani, stepped in as acting city manager but resigned after a fraud charge was opened against him. He was being investigated by the Hawks. It is alleged that he had committed fraud to secure a higher salary.
The former executive director of the metro’s electricity and energy directorate, Luvuyo Magalela, was then appointed acting city manager, but earlier in February Nqwazi returned to the post as her suspension had lapsed. However, she was suspended again last week, so Magalela is once again the acting city manager.
The electricity and energy department is also being investigated by the Hawks.
The Nelson Mandela Bay metro has had three coalition governments since the local elections in 2021. The first was led by the ANC, the second by the DA and the third by an ANC-EFF coalition, which is when the National Alliance’s Van Niekerk became mayor.
Van Niekerk is also under investigation by the Hawks.
Impact on services
Jay Kruuse from the Public Service Accounts Monitor said conditional grants are ringfenced public funds that can be spent only in specific areas.
“If the law and procedure for using such grants are not followed, then the funds can be withheld or must be returned to the National Treasury. In general, if a municipality does not have adequate capacity to plan for the use of conditional grants, then they will likely have to return such funds or they will underspend.
“We have seen how municipalities that don’t have adequate leadership, and especially effective procurement processes, often result in delays in the appointment of contractors or a failure to properly appoint and manage contractors.”
Kruuse said that, from a perusal of the Auditor-general’s report, it was clear that this was a recurring problem for the metro.