Our Viewpoint | National Treasury withholding municipal funds
"While the National Treasury insists that because the withholding is temporary, service delivery should not be affected,......."
After years of watching municipalities disregard the Municipal Finance Management Act (MFMA) and accumulate billions of rands in unauthorised, irregular, fruitless and wasteful expenditure, the National Treasury has finally pulled one of the strongest levers available to it: the temporary withholding of equitable share transfers.
Considering, over the years, the National Treasury and Auditor-General have exhausted almost all avenues to have the municipalities to comply with the law and restore fiscal discipline, the decision to withhold funds is difficult to fault.
According to statistics released by the National Treasury and corroborated by the Auditor-General, municipalities have incurred more than R145 billion in irregular expenditure since the 2021/22 financial year. Further, the municipalities have accumulated more than R24 billion in fruitless and wasteful expenditure and over R118 billion in unauthorised expenditure.
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Surely, any responsible custodian of public finances would under the circumstances consider drastic measures to ensure accountability.
To justify its decision to withhold funds, the National Treasury went to lengths in demonstrating that it did not arrive at this decision overnight: municipalities were issued with MFMA circulars, received technical support, attended training sessions and participated in one-on-one engagements.
This is therefore not a case of the national government ambushing municipalities. Having said that, the unintended consequences of withholding funds should not be ignored.
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The most worrying part is that it is residents who are most likely to suffer from the withholding of equitable share allocations, and not the politicians or senior municipal officials whose failures prompted the intervention.
While the National Treasury insists that because the withholding is temporary, service delivery should not be affected, the reality is that some municipalities are so cashstrapped that any withholding of funds will plunge them deeper into financial crisis.
South Africans have grown accustomed to seeing municipalities placed under administration, receiving financial recovery plans or being subjected to various interventions, only to watch the same governance failures re-emerge a few years later. This latest intervention should not become another chapter in that familiar cycle.
