Joburg and Tshwane face massive funding cuts

Two Gauteng metros, Johannesburg and Tshwane, have been notified by the National Treasury that they risk forfeiting a combined R1.8 billion due to underperformance and noncompliance of expenditure of grants.

Johannesburg, which has a R7.6 billion capital project budget, risks forfeiting R1.2 billion. Tshwane, which has a R2.4 billion capital project budget, risks forfeiting R635 million.

Treasury deputy director-general Malijeng Ngqaleni wrote to the metros earlier this week and proposed stopping a portion of the 2023/24 allocations of grants because reported expenditure of the allocated funding for Tshwane and Johannesburg sits at below 40% and 45% respectively.

If the municipalities fail to provide reasons to the Treasury as to why the funds should not be reverted back to the fiscus within seven days, the money will go back into the national coffers.

In addition, the Treasury requires progress updates on authorised projects, information on cash coverage of transferred grants, and a comparison of the initial cash flow projections versus actual performance, among other requirements.

The letters said that the Treasury intends to invoke a section of the Division of Revenue Act which allows for them to either fully or partially stop the transfer of the grant allocations to a municipality if they anticipate that the municipality would substantially underspend the funding.

The various grants are allocated for:

• Project preparation;
• Urban settlement development;
• Upgrading of informal settlements;
• Public transport;
• Neighbourhood development. 

In a response, Tshwane mayor Cilliers Brink said that the city “takes this risk very seriously” and “will give a full account of our situation to the National Treasury and outline plans to spend our full capital allocation.”

“We know that spending our full capital budget is essential to improving infrastructure for service delivery, especially to the poor [and are] adamant that this spending must procure value for people’s money, and not incur irregular, fruitless and wasteful expenditure,” said Brink.

Johannesburg city manager Floyd Brink told the Sowetan that he had received the letter dated February 12, but would not answer media enquires and referred questions to city spokespeople.

City of Johannesburg spokesperson Nthatisi Modingoane said that a detailed response will be provided to the National Treasury within the next two days. “We want to assure our residents that a majority of the allocated funds have already been committed and contractors are currently working on approved projects,” said Modingoane.

“We will outline the steps we are taking to expedite the completion of projects that are lagging behind, ensuring that all grant allocations are spent by the end of the financial year,” he added.

Both metros, which have been governed by at times unstable coalitions, have been plagued by budgetary and service delivery issues.

Recently, Johannesburg announced that it would need to adjust its R80.9 billion budget downwards, whilst Tshwane’s debt to service delivery providers has ballooned as it attempts to get a grip on its financial woes by tapping into the over R23.3 billion owed to them.

Read: Tshwane’s plan to save itself from the brink of financial collapse