National Treasury withholds funding to Buffalo City

Buffalo City Metro’s persistent struggle in dealing with unauthorised, irregular, fruitless and wasteful expenditure (UIFWE) amounting to more than R640m, has forced the national government to withhold millions in equitable share allocation due to the city this month.

On Tuesday, the National Treasury announced it would withhold these allocations from 69 troubled municipalities across the country, six of them in the Eastern Cape, including the only two metros, over persistent noncompliance with legislation.

While the amounts to be withheld were not disclosed, finance minister Enoch Godongwana told the Dispatch on Tuesday that his department was compiling the figures, which would be made public at a later stage.

A Treasury insider said there was still a validation process to go through before the figures could be made public.

“Even the letters sent to municipalities did not specify figures involved at this moment,” the insider said.

Other Eastern Cape municipalities affected by the withholding of funds are Makana, Port St John’s, Inxuba Yethemba and Sunday’s River Valley.

Equitable share is an unconditional, constitutionally mandated transfer of nationally raised revenue to municipalities, designed to address historical inequalities, by enabling them to provide free basic services such as water, sanitation and electricity to poor households and fund essential administrative functions

Unlike conditional grants, these funds are largely unrestricted, and municipalities have the autonomy to determine their own spending priorities.

While five of these municipalities are penalised for failing to adequately deal with UIFWE and implementing consequence management, Inxuba Yethemba has been red-flagged for adopting an unfunded budget in the 2025/2026 financial year.

These drastic steps, the Treasury said, were temporary but would be enforced until the affected municipalities get their houses in order.

They are meant to “instil fiscal discipline and ensure that public money is properly managed”.

They also relate to nonpayment of creditors such as the auditor-general, Eskom, Sars, pension funds and the debt owed to the water boards.

The National Treasury said this decision followed “persistent and serious noncompliance with the Municipal Finance Management Act (MFMA) and its supporting regulations, despite support provided by the National Treasury through guidance, engagement and formal or informal communication”.

The funds would remain on hold until issues such as UIFWE were adequately addressed, and municipal officials and office-bearers responsible held accountable where necessary.

“These municipalities have been given sufficient notice in writing and urged to take measures to change their financial management positions ahead of the withholding of funds.

“It is important to note that this is a corrective rather than punitive measure,” it said.

BCM spokesperson Luzuko Buko said city authorities were “fully co-operating with National Treasury regarding the ongoing management of historical UIFWE”.

Buku, who refused to speculate on the amount to be withheld, said BCM was confident that no service delivery disruptions would be recorded as a result.

“Our commitment to maintaining an aggressive pace of road construction, ensuring consistent water and sanitation services, and upholding the high standard of cleanliness achieved through our consistent refuse removal programme remains unwavering.

“As a municipality, we respect the intent of the National Treasury in encouraging municipalities to accelerate the clearing of historical irregular expenditure and to ensure robust consequence management.

“The current engagement involves the provision of additional information and evidence to further satisfy the requirements set out by the National Treasury.

“We are taking the intention with the requisite seriousness but we are confident that we will meet the requirements by the National Treasury,” Buku said.

To ensure that BCM not only complies with the National Treasury requirements, but improves its financial governance, Buku said it was implementing a number of critical governance and oversight reforms, including the adoption of a comprehensive UIFWE management policy and a UIFWE reduction and prevention strategy.

Makana municipal spokesperson Anele Mjekula did not reply to questions on Tuesday, and attempts to contact other affected provincial municipalities were unsuccessful.

Provincial treasury spokesperson Pumelele Godongwana said municipalities were aware of the consequences of their noncompliance, but were “very slow in dealing with flagged issues, despite continuous support by the province and National Treasury”.

“The withholding of funds is not an ideal solution for the province, if you consider the serious service delivery challenges that we continue to face.

“We, however, remain hopeful that the move will not have an adverse impact on service delivery as it is temporary in nature,” Godongwana said.

The affected mayors, Godongwana said, would have to present these developments to council, “with responses indicating how they are going to address the matters raised by the minister, with the council resolutions forming the basis of their response to the minister”.

Provincial Cogta spokesperson Pheello Oliphant said MEC Zolile Williams was concerned about the persistent underperformance of the two provincial metros, “because they carry a big chunk of the gross domestic product of the province”.

“Their governance underperformance influences not only the province but the country.

“The metros must jerk up their constitutional capacity.”

Oliphant said that on Wednesday and Thursday, a delegation led by his boss and Cogta deputy minister Dickson Masemola would visit Nelson Mandela Bay to “dissect the root problems of the governance challenges” in that municipality.

“The problems of Makana, Sunday’s River Valley and Inxuba YeThemba require concomitant and pointed solutions and are administrative problems that revolve on the ineptitude of the councillors and administrators,” Oliphant said.

Daily Dispatch