PRETORIA – National Treasury has defended its decision to withhold July equitable share transfers to 69 South African municipalities, saying the move will not affect service delivery and is necessary to ensure creditors are paid.

The department withheld R13.5 billion from this year’s total R100 billion equity share allocation, officials told media at a briefing in Pretoria on Wednesday.

Deputy director-general for intergovernmental relations Ogalaletseng Gaarekwe said the withheld portions would be released once municipalities submit signed payment plans with their creditors.

“This time last year, we had withheld for 75 municipalities, but I can assure you that by early August, we had already released the money for everyone. So, it depends on how fast the municipalities sort out the payment plans and send us those payment plans,” Gaarekwe said.

He explained that once portions are released and municipalities pay their creditors, the full amount is made available.

“We are not expecting it to impact service delivery because the majority of the funding at local government level is raised from own revenue,” he said.

Corrective action

Gaarekwe said the withholding of funds was not punitive but corrective and preventative, aimed at changing municipal behaviour regarding creditor payments.

“In our view, we are correcting the behaviour in municipalities. We need to get into the habit of paying our creditors. There are instances where pension fund monies are taken from salaries, but they are not paid over. So, if something happened, families are not able to claim because the municipality did not pay,” he said.

The affected municipalities were given notice ahead of the withholding and were encouraged to provide reasons why funds should not be withheld.

“The first set of letters were sent to municipalities on the 22nd of June and the 23rd. At that time, we wrote to 99 municipalities and 30 responded in a way that we have not withheld their money,” Gaarekwe said.

He added that the measure is a last resort and the department hopes behaviour will change so it does not have to be repeated.

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Ripple effect

Chief director of local government budget analysis Jan Hattingh said continued non-payment by municipalities has a ripple effect that eventually hampers service delivery.

“As a result of this action, jointly with the Department of Water and Sanitation, two water boards that were on the brink of being closed are still operational. If a water board cannot proceed and provide services, the impact of that is much more negative, and that means communities cannot get water,” Hattingh said.

He said Treasury has observed that many councils adopt budgets that are not funded, leading to unauthorised expenditure.

“Part of our work and support is to help them to table a funded budget and help them to deal with the planning problems upfront. If you don’t plan well and you overspend your budget, that portion is regarded as unauthorised expenditure,” he said.

Hattingh said the department has developed a framework for municipalities to deal with consequence management and is working with provincial treasuries to improve planning and budgeting systems.

“We are concerned that services are not rendered to communities. The real concern is the fact that if municipalities don’t use grants productively and from time to time, the money gets surrendered back to the revenue fund. That is not the desired effect that we want because those services and that funding are meant to facilitate service delivery,” he said.

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