Concern over National Treasury intention to freeze funding to municipalities

MAY 14, 2015

MPs and municipal stakeholders expressed concern in Parliament on Wednesday over millions of households which could be left without services due to a decision by National Treasury to freeze grants to municipalities, which owe money to Eskom. 

National Treasury recently announced a decision to freeze funds to 59 municipalities, which owe Eskom and water suppliers around R12.6 billion. However, the national grant to municipalities funds among, other things, basic services. Smaller municipalities with small revenue bases are expected to be affected the most.

The African National Congress (ANC) on Wednesday morning asked in the Select Committee on Finance for a political solution and requested that the ministers of Finance and Co-operative Governance to intervene.

Meanwhile, the South African Local Government Association (SALGA), has sought legal opinion and on Wednesday formally informed National Treasury that it will challenge the decision.

Subesh Pillay, Chairperson of SALGA's Working Committee for Finance, said in this case, the keys of the municipalities might as well be taken away and the doors closed.

While SALGA Chairperson, Thabo Manyoni, said government departments and entities also owed municipalities billions and therefore must share the blame.

According to SALGA figures, national government departments owe municipalities around R5 billion.

The Financial Fiscal Commission (FFC) also provided input and strongly warned against the process to collect the debt from municipalities.

Deputy Director General in the Department of Co-operative Governance, Muthotho Sigidi, said that although legislation required that the departments be consulted before such a decision was made, Minister Pravin Gordhan was only informed after National Treasury had made the announcement.

Bongani Khumalo, Acting Chairperson and Chief Executive of the FFC, strongly urged that proper processes must be followed and that such a decision be the last resort so that the public was not unduly affected by this.

Mkhululi Ncube, Program Manager for Local Government in the FFC, said it was about temporary interruption of services to nearly 1.3 million poor households, especially in provinces such as the Free State and North West.

The national grant contributes between 31% and 37%  to certain municipalities' operating income, Ncube said.

-additional reporting SABC.