What crisis? Joburg scrambles to have R3.6 billion in funding reinstated
The City of Johannesburg will pay creditors by next week in order to have R3.6 billion of government funding reinstated and is in talks about selling bonds to fund upgrades to infrastructure, Mayor Dada Morero said.
The Treasury on Tuesday withheld R13.5 billion from 69 municipalities, including Johannesburg, that are struggling to manage their finances.
The move is intended to instil fiscal discipline, curb wasteful expenditure and hold municipal officials accountable.
Johannesburg plans to pay almost R2.4 billion to creditors, including Rand Water and Eskom by mid-July, Morero told reporters on Wednesday.
“On our side, we will fully comply with the process,” he said.
The city is also making progress on plans to issue a bond to fund repairs to its crumbling infrastructure.
“We are now in discussions on the preparations that need to be done, appointing the right transaction advisers and all that stuff, but we’ve got an appetite to go out to the market,” Morero said.
Earlier, National Treasury said it would release the withdrawn funding once municipalities submit plans on how they’ll pay their debts.
“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,” Ogalaletseng Gaarekwe, deputy director-general of intergovernmental relations at the Treasury, told reporters during a briefing in Pretoria.
The rest of the funds will be disbursed on condition that the municipalities reduce unauthorised, irregular and wasteful spending by at least 25% by the end of September and make payment arrangements with creditors, among other measures, Gaarekwe said.
The Treasury estimates that since 2021-22, municipalities have incurred R24.1 billion in such expenditure.
Morero said the city will revise its strategy to curb unauthorised, irregular, fruitless and wasteful expenditure to better align with Treasury’s guidance.
It will also identify the drivers of additional spending by the end of the third quarter, the largest of which is City Power’s R2.1 billion overspend on bulk electricity purchases, he 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 rand to the city’s wage bill over two years—a pact he described as illegal and unaffordable.
Even so, the Treasury doesn’t see the withholding of funds affecting 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.
Morero also said the city was not in a financial crisis, pointing to Moody’s Ratings’ recent review which confirmed its Ba3 rating with a positive outlook, citing reduced risk of debt acceleration and a solid operating revenue position.
The move “is an indication that the things that we have started putting in place are yielding results,” he said. “It’s an indication of confidence.”
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