South Africa’s richest city in hot water
The City of Johannesburg has been put on notice by the National Treasury, which is threatening to cut off funding to the metro over its financial governance failures.
In a letter sent to ANC Joburg Mayor Dada Morero at the end of April, Finance Minister Enoch Godongwana chided the city’s executive for its declining financial position.
Democratic Alliance mayoral candidate for the city, Helen Zille, said that the notice “blows the lid” on the city’s financial meltdown, showing it is “effectively bankrupt”.
At the top of the list of multiple issues with the city, Godongwana flagged the 2025 deal struck by Morero and unions, which committed to R10.3 billion in salary increases in a “politically facilitated agreement”.
The minister directly instructed the city to halt the implementation of this agreement because the city simply cannot afford it.
“You are hereby directed to stop proceeding with the implementation of this illegally signed agreement that has the potential to destroy the sustainability of the City of Johannesburg,” Godongwana wrote.
“You very well know this city can’t afford this agreement.”
However, Zille flagged a host of other issues raised by the Treasury, pointing to Joburg’s financial distress.
She noted that the city owes its creditors R25.2 billion, while only having R3.9 billion in cash and cash equivalents.
“This means the city does not have the money to pay R21.3 billion owed to creditors,” she said.
“This is the core reason behind the city’s inability to repair or maintain infrastructure, leading to consistent power and water outages, and the failure to fix breakdowns, resulting in the steady collapse of service provision across the board,” she said.
Zille said the letter also bluntly states that the city has violated the laws governing municipal finances.
These actions have the “potential to destroy the sustainability of the City of Johannesburg beyond this term of office, as well as the negative impact on the national economy at large,” Godongwana wrote.
The minister issued a formal notice to the city stating that if it is unwilling to remedy the situation “with immediate effect,” the National Treasury will invoke Section 216(2) of the Constitution.
This will hold back Johannesburg’s allocation under the Division of Revenue Act from July.
“This amounts to over R8 billion, which would be the final nail in Johannesburg’s coffin,” Zille said.
Joburg finances falling apart
The minister’s letter follows several financial blows to the city in recent months, including rejection by the Agence Française de Développement (AFD) of a second R2.5 billion loan.
Zille said this was because the city had failed to comply with the conditions attached to an earlier 2024 loan.
The city’s bonds were suspended by the Johannesburg Stock Exchange for failing to submit audited annual financial statements in a timely manner, and ratings agency Moody’s has warned of a further downgrade in the city’s credit rating.
Among the other key issues flagged by the minister, Zille highlighted:
- The Adjustment Budget passed in March is not funded. This amounts to unauthorised expenditure, a serious violation of the law. The city proceeded to pass the budget despite the Treasury’s warnings.
- The city’s failure to comply with the Municipal Regulations’ requirements for the Municipal Standard Chart of Accounts.
- The city’s failure to prevent and address unauthorised, irregular, fruitless and wasteful expenditure.
- The city’s failure to pay its creditors within 30 days of receiving an invoice violates the Municipal Finance Management Act.
Zille said opposition parties have been warning about these issues for years, which the ANC-led coalition currently governing the city has ignored.
“We will seek to hold all councillors who supported these illegal decisions in council, personally responsible for the recovery of the money lost to the city under the MFMA,” she said.
This states that “Political office-bearers or officials who deliberately or negligently permit such expenditures are personally liable.”
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