Finance Minister Enoch Godongwana gives R7.1 billion to failing municipalities

South Africa’s Finance Minister Enoch Godongwana said the National Treasury will not hesitate to again withhold funding from municipalities that fail to improve their financial management, after approving the release of R7.1 billion in previously withheld allocations.

The Treasury, which earlier this month withheld R13.5 billion of Local Government Equitable Share transfers from 69 municipalities, including Johannesburg, will commence releasing the remaining funds from 31 July, Godongwana said in a statement on Tuesday.

“The decision follows the comprehensive assessment process undertaken, including the active monitoring of compliance by the affected municipalities after National Treasury temporarily withheld transfers.”

Speaking at a briefing on the decision later, Godongwana said municipalities “are not off the hook,” and that they would be “required to perform between now and the second tranche.”

The Treasury disburses the Local Government Equitable Share — allocations of nationally-raised revenue to municipalities to help fund basic services and administrative functions — in three tranches each year, typically in July, December and March.

The Treasury had previously said the withheld funding would be released only once municipalities submitted plans to settle their debts, reduce unauthorised, irregular and wasteful expenditure by at least 25% by the end of September, and enter into payment arrangements with creditors, among other measures.

While not all municipalities met all of the conditions, the Treasury decided to release the funds ahead of local government elections on 4 November to keep financially strained municipalities functioning.

“The truth is, we are at the tail end of the term of these councils, and we shouldn’t allow a situation that will collapse them before 4 November,” Cooperative Governance and Traditional Affairs Minister Velenkosini Hlabisa said at the briefing.