Treasury’s threats to withhold funding for 75 municipalities will create new challenges – expert

Municipal governance expert Miyelani Holeni said threats by the National Treasury to withhold funding for 75 municipalities due to alleged financial mismanagement will only create a new set of challenges for local government.

National Treasury has been withholding quarterly payments from the fiscus to municipalities, many of which are heavily indebted to bulk service providers, in an effort to ensure they settle their debts, including billions owed to Eskom and water boards.

The equitable share is unconditional funding from the fiscus, intended to help municipalities deliver basic services to poor households and run their administrations.

The South African Local Government Association (SALGA) recently appealed to the Treasury to release the December tranche of payments, warning about the impact on service delivery.

Weighing in, Holeni said: “I think the argument which has come from the South African Local Government Association, which says at least make the conditions predictable, at least agree on timing, communicate with the municipalities in terms of what to expect and when to expect those payments.”

He said that without the necessary funding, the pile-up will worsen.

“In some of the cases, they will have gone out to either utilise their overdraft facilities, which come at a cost as well. So, the cost compounds as they utilise the funds which are borrowed from their financiers. So, I think it's not definitely a solution that the Treasury should be continuing within the current form. They definitely need to look at different ways of how to incentivise good governance.”