Metro squeezed as Treasury holds back R330m funding
The Nelson Mandela Bay municipality is sitting with a massive hole in its bank account, as the National Treasury withholds R330m in equitable-share funding from the city.
The Treasury has followed through on its threat to keep back money from the municipality if it did not implement a new mandatory accounting system – Municipal Standard Chart of Accounts (Mscoa) – which has to be rolled out across all municipalities.
Mscoa, which is meant to link all municipalities onto a single IT system that is linked to the national government, has cost the metro tens of millions of rands to date.
The city needs about R200m more to implement its Enterprise Management Solution – an internal IT system – and Mscoa and to ensure it is properly integrated.
The National Treasury confirmed on Tuesday that it had not released the second tranche of the total R1.2bn equitable-share allocation to the municipality in December.
“The National Treasury delayed the transfer of equitable share due to non-compliance to the Municipal Regulation on a Standard Chart of Accounts.
“The National Treasury is meeting the municipality on January 17 to resolve the issues,” it said.
The money plays a crucial role in ensuring the municipality is able to provide free basic services to the indigent.
Should the Treasury not release the money – which forms part of its annual budget – it could plunge the cash-strapped municipality into a crisis.
Acting city boss Peter Neilson and acting chief financial officer (CFO) Jackson Ngcelwane are heading to Pretoria on Thursday to appeal to Treasury officials to release the money.
While no formal reasons have been given to the city for the non-payment of the second tranche of the R1.2bn equitable share for the year, Neilson said officials at the Treasury had hinted that it might have to do with the fact that the metro did not have a permanent CFO.
The municipality has not had a permanent CFO at work for two years.
Former CFO Trevor Harper was suspended in November 2016 and resigned in February 2018. His position is yet to be filled.
Neilson said there was also a “hint” the city was being punished for missing several deadlines to be Mscoa-compliant.
He said there were technical difficulties in trying to integrate the systems and becoming Mscoa-compliant.
“We have received no formal notification that we are not going to be paid.
“But the fact that we have not been paid is notification enough,” Neilson said.
Letters sent in December querying when the money would be released had gone unanswered.
“We’re dependent on the equitable share,” he said.
“It’s money we spend on free basic services – the electricity and water discounts for [Assistance to the Poor] customers.
“If we did not get the equitable share, there would be massive shortfalls in our budget, which means we would have to set high rates and tariffs and that would be unaffordable for the ratepayer.
“It’s a non-negotiable dependency.”
Neilson said the city would be appealing for help from the Treasury on how to move for-
ward with its technical challenges and budget constraints to have a system that is Mscoacompliant.
DA councillor Retief Odendaal said he was concerned about the impasse between the Treasury and the municipality, and that nothing highlighted the alleged corruption in the metro more than the Treasury withholding funds.
“Should we not be able to resolve it – and it’s very likely we’re going to lose this funding – it will mean our adjustment budget is likely to be in a deficit with more than R400m.
“That will also lead to our budget over the MTEF [medium-term expenditure framework] period being unfunded.”
Budget and treasury political head councillor Mkhuseli Mtsila said should the municipality not receive the second tranche of the equitable share, it would be bad for service delivery in the metro.
“Equitable share relates to service delivery, so if we don’t get it, it would be really bad for us,” he said.
Mtsila said the Treasury had not indicated the reasons for withholding the funds and that according to information he had received, the person responsible had gone on leave and the processes could not be completed.
“The National Treasury always gives reasons for doing what it does and there [were] no reasons attached.
“Whatever the DA says it is an assumption. If you’re wrong, the National Treasury will tell you,” Mtsila said.
Bay mayor Mongameli Bobani said the DA should accept it was no longer in government and if it needed information, its councillors were more than welcome to write to him.
“When we took over government ... we also took on the failure of the DA to ensure that by December we would get our second allocation.
“We’re working together with the Treasury and this is simply their way in terms of compliance that we need to sort out certain things.”