National Treasury cuts off Johannesburg

South Africa’s National Treasury will withhold state funding for Johannesburg and dozens of other municipalities this month over their failure to manage their finances properly.

The measure is being taken to instil fiscal discipline, reduce irregular and wasteful expenditure and ensure that municipal officials are held accountable, the Treasury said in a statement on Tuesday.

“The decision follows persistent and serious non-compliance with the Municipal Finance Management Act and its supporting regulations, despite support provided by the National Treasury,” it said.

Finance Minister Enoch Godongwana threatened to withdraw support to Johannesburg in May, after it agreed a deal with municipal workers that would add R10.3 billion to the city’s wage bill over two years — a pact he described as illegal and unaffordable. 

The loss of government support adds to Johannesburg’s financial strain as the city owes hundreds of millions of dollars to state power and water utilities and has suspended its road-repair services because it can’t pay for fuel for maintenance vehicles. 

Godongwana is working to restore confidence in public finances even as the ANC — the biggest party in government and the Johannesburg city council — struggles to improve governance at the municipal level. Godongwana and Dada Morero, Johannesburg’s mayor, are ANC members.

The decision to withhold funding comes before crucial local elections in November, with polls showing the ANC is likely to lose its position as the dominant party in Johannesburg to the Democratic Alliance.

Morero’s spokeswoman didn’t immediately respond to a request for comment sent by text message.

In addition to Johannesburg, funds will be withheld from municipalities including Mangaung in the Free State province, Nelson Mandela Bay and Buffalo City in the Eastern Cape, and Mopani in Limpopo province.

The Treasury will consider releasing funds to the cities on the condition that they reduce unauthorised, irregular, fruitless, and wasteful spending by at least 25% by the end of September and make payment arrangements with creditors.

It will also request evidence that the previously received funds are being used as intended.

“The affected municipalities are required to submit to the National Treasury a signed payment agreement entered into with their creditors,” the Treasury said.

“Once a signed agreement is received, the National Treasury will release an amount equivalent to the invoice, guided by the payment agreement and adjusted for any shortfalls from previous months, where applicable.”