Johannesburg in hot water

South Africa’s National Treasury said it will release funding that’s been withdrawn from dozens of municipalities after they’ve submitted plans on how they’ll pay their debts.

The Treasury on Tuesday withheld R13.5 billion from 69 municipalities, including Johannesburg, the country’s economic hub, that are struggling to manage their finances.

The measure was taken to instil fiscal discipline, reduce irregular and wasteful expenditure and ensure that municipal officials are held accountable, it said.

Since 2021-22, municipalities have incurred R24.1 billion in wasteful expenditure.

“What we are requesting from those municipalities is for them to give us the payment plan,” Ogalaletseng Gaarekwe, deputy director-general of intergovernmental relations at the Treasury, told reporters in Pretoria on Wednesday.

“Once they give us that, we’ll release a portion of the money, which is probably one-third for them to go pay those accounts, as agreed with those creditors.”

The rest of the funds will be released on condition that the municipalities reduce unauthorised, irregular, fruitless and wasteful spending by at least 25% by the end of September and make payment arrangements with creditors, among other measures, Gaarekwe 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 suspension of R3.6 billion in funding to Johannesburg – equivalent to almost 4% of its annual budget – compounds its financial woes.

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. 

Even so, the Treasury doesn’t expect the withholding of funds to affect service delivery. 

“We are not expecting it to impact service delivery, because the majority of the funding is at the local government level, they raise it from their own revenue,” Gaarekwe said.

Johannesburg Mayor Dada Morero is scheduled to respond to the Treasury’s decision later on Wednesday.