The cash-strapped Buffalo City Metro is set to score a grant windfall of more than half a billion rand from the National Treasury, pending the city meeting a list of specific targets set out in their performance improvement action plans.
This comes after BCM was named one of six metropolitan municipalities to have met the Treasury’s requirements for the new financial performance incentive funding, the urban development financing grant, as announced by finance minister Enoch Godongwana in his budget speech last week.
Of SA’s eight metro municipalities, only Nelson Mandela Bay and Ekurhuleni failed to make the cut for the incentive funding.
According to mayoral committee member for finance Noma-Africa Maxongo, BCM is set to receive an initial allocation of about R133m over the next three years, with R48.5m granted in 2025/2026, R39.2m in the next year and R45.2m in the 2027/2028 financial year.
Provincial Treasury department head Daluhlanga Majeke said the allocation constituted only 20% of the total grant the city could receive.
This means that, provided certain conditions are met, BCM could receive as much as R665m, if not more, from the new performance incentive funding.
According to a National Treasury document on the new grant, the goal is to increase investment in resilient infrastructure and spatially targeted urban development in metropolitan municipalities, and to eradicate spatial inequalities for sustainable and efficient urban services and spaces that grow the economy and contribute towards financially sustainable metropolitan municipalities.
Maxongo, an ANC councillor, said the grant would help the metro deal with historic challenges in revenue generation, such as water and sanitation, electricity and refuse removal.
It will also assist in rectifying ailing infrastructure for these services.
Maxongo said based on the National Treasury conditions, access to the programme and eligibility for the grant was based on compliance with the submission requirements for metro trading service turnaround strategies, its institutional reform road map, business and investment plans, and performance improvement action plans of acceptable quality.
“The grant is disbursed based on metro achievement of [key performance indicators] and targets in performance improvement action plans for each trading service.
“Subsequent annual allocations will be adjusted subject to progress against the KPIs or targets,” Maxongo said.
In his speech, Godongwana said the decline in municipal services was evident across cities, towns and rural villages.
Godongwana said that, as outlined by President Cyril Ramaphosa in his state of the nation address, phase 2 of Operation Vulindlela, the institutional structure of local government would be reviewed through updating of the white paper on local government.
He said the review of the local government fiscal framework would examine how to appropriately finance local government relative to their functions and form.
“Further allocations in the programme are dependent on municipalities meeting specific targets set out in their performance improvement action plans.
“For 2025/2026, this includes critical institutional, governance and management changes to create as enabling environment for long-term investment in infrastructure,” the minister said.
Allocations will be transferred to metros based on the achievement of targets related to management accountability; transparency and institutional capability; financial performance, including better collections, cash flow, debtors management and capital investment; and service delivery efficiency, such as reduced losses and better quality and reliability.
“The water and sanitation services both are currently profitable, but have very serious service delivery challenges."
The purpose of the new grant, according to the National Treasury, is to promote spatially transformed cities with financially sustainable trading services that are able to meet their service delivery mandates.
The aim is also to support metro municipalities to enable them to leverage additional concessionary and commercial loan finance to enhance sustainable infrastructure investment.
During his state of the nation address in February, Ramaphosa said in many cities and towns across SA, roads were not maintained, water and electricity supply was disrupted, refuse was not collected and sewage ran down the streets.
Many of these challenges, Ramaphosa said, arose from the design of the local government system.
“We will therefore undertake extensive consultation to develop an updated White Paper on Local Government to outline a modern and fit-for-purpose local government system.
“We will review the funding model for municipalities as many of them do not have a viable and sustainable revenue base.”
In his state of the province address, Eastern Cape premier Oscar Mabuyane said BCM was one of 14 provincial municipalities identified as in need of “dedicated support” from the provincial government.
“Our support to these 14 municipalities will include ensuring functional councils and governance structures, enhancing municipal capacity to collect revenue, as well as improving delivery of basic services,” he said.
DA councillor Geoff Walton, who speaks for the party on finance matters, said his party welcomed any grants which may assist the municipality in turning around the deficit on the electricity service.
“The water and sanitation services both are currently profitable, but have very serious service delivery challenges.
“These grants would likely assist with the infrastructure problems to alleviate those challenges.
“At this time we not fully aware of the detailed conditions attached to these grants.
“Much depends on those conditions and it is difficult to indicate the probability of complying fully so as to access additional grant monies in the longer term.
“However, we caution that while the grants will assist with ailing infrastructure, it is not clear that this will translate into improved revenue as the reality is that many in the community find it difficult to afford the services at current tariff rates,” Walton said.
EFF councillor Mziyanda Hlekiso welcomed the grant, but cautioned the municipality that it could not only depend on electricity and water services to generate revenue.
Hlekiso said the metro needed to explore other methods to increase revenue collection.
He said metro authorities had to ensure the grant funds were properly managed, with no “unjustifiable deviations” in spending.
Daily Dispatch
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