Treasury releases R7.1bn to municipalities after funding freeze

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 balance of the funds from July 31, 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.”

Read: 42 errant municipalities off Godongwana’s naughty list

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.”

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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.

Read:
Time to pay up: A look at municipal debt
Watch: Godongwana gives update on withheld municipal transfers

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.

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

Read:
Godongwana hauled to parliament over R13bn municipal funding freeze
Joburg’s cash crisis threatens essential services

“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 November 4,” Cooperative Governance and Traditional Affairs Minister Velenkosini Hlabisa said at the briefing.

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