Treasury withholds funds to 'unprecedented' number of municipalities over alleged mismanagement

The National Treasury has been withholding quarterly payments from the fiscus to municipalities, many of which - as South Africans are well aware, are not managing their funds properly.

Moneyweb reports that a total of 75 councils across the country are at risk of not receiving the tranche of their equitable share payable this month due to alleged financial mismanagement.

The South African Local Government Association (SALGA) is appealing to Treasury to urgently release this December tranche, accusing it of failing to communicate adequately with the defaulting municipalities.

Stephen Grootes gets some insight frommunicipal governance expert Miyelani Holeni, Group Chief Advisor at Ntiyiso Consulting.

Miyelani describes equitable share as the money the fiscus makes available as a budget to augment the operational activities of municipalities, and as such it really should not have any conditions attached.

While this witholding practice is not new, targeting such a high number of councils is unprecedented, he says.

"It's a carrot and stick approach which Treasury has always had up its sleeve in trying to drive the right kind of behaviour within municipalities, but this instance
with 75 municipalities is something that's worth much closer attention."

He recalls that Treasury shifted from providing equitable share at the beginning of the financial year for the entire year to quarterly disbursement to try and manage good use of finances within municipalities, but the strategy is not working.

"Treasury have reverted to withholding it and trying to get at least the right kind of management financially, for them to be committing regular expenditure, to be advertising tenders that must be awarded and driving good governance... but, as we have seen, it is not making a change. It's now causing a different kind of pressure within municipalities, also at provincial and national level (of government)."

"In some of the cases they would have resorted to using their overdraft facilities, which come at a cost as well, so the cost compounds."

To hear more from Miyelani, listen to the interview audio at the top of the article