Errant municipalities must fix budgets and spending plans to access funds

By Thebe Mabanga

Municipalities that have had their equitable share withheld by National Treasury will need to address unfunded budgets, put in place a payment plan to key creditors and show how they will reduce wasteful expenditure.

This is according to the National Treasury, which briefed the media on Wednesday after announcing that 69 municipalities have had R13, 5 billion of equitable share for July suspended due to failure to comply with the Municipal Finance Management Act (MFMA).

The withheld amount represents about 12% of R110 billion on total equitable share allocation.

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The municipalities include the City of Johannesburg (CoJ), which has had about R 3,5 billion withheld. The CoJ’s situation is particularly precarious as the city is said to have between five and 17 days cash flow cover.

Of particular concern for the city is its impact on its credit rating, which last week was spared a downgrade by Moody’s and had its outlook kept positive.

Treasury’s deputy-director general for intergovernmental relations, Ogalaletseng Gaarekwe, said at the press briefing that the municipalities fall into three categories, each with its own remedy.

The first are those with unfunded budgets. These will have to undertake not to table any unfunded budgets. This would require amending their adjusted budgets, tabled in the last quarter of the municipal final year.

The next category is those municipalities who owe Eskom and water boards substantial amounts. Gaarekwe says these municipalities will have to submit credible repayment plans signed by the creditor agency and will have a third of the withheld funds released specifically for the payment of the debt, before the rest of equitable share will be paid.

The last category is those municipalities who have failed to contain or reduce