Finance Minister Enoch Godongwana has defended the stopping of R2.7 billion in transfers of conditional grant funding to municipalities and re-allocations at the end of December 2022.
Godongwana said the National Treasury initiated the process of stopping and re-allocation at the end of the second quarter of the 2022-23 municipal financial year and conducted an analysis of the conditional grants performance.
“The reasons that informed National Treasury to stop R2.7bn transfers of conditional grants are anticipation that a municipality shall substantially underspend the allocation or any programme, and serious or persistence material breach of the Division of Revenue Act.
“This decision was considered to safeguard the allocations against possible misuse of the funds and prevent funds from being utilised for operational activities,” he said.
Godongwana was responding to parliamentary questions from DA MP Jacques Smalle, who asked about the reasons the National Treasury stopped the R2.7bn transfers of conditional grants and the breakdown of the types of grants that were affected.
Smalle also enquired whether the affected municipalities will be considered for the next financial year.
The affected capital grants included Water Services Infrastructure Grant, Regional Bulk Infrastructure Grant, Public Transport Networks Grant and Urban Settlements Development Grant.
Others were Informal Settlements Upgrading Partnership Grant, Neighbourhood Development Partnership Grant, Integrated National Electrification Programme, Municipal Infrastructure Grant and Integrated Urban Development Grant.
The affected capacity grants were Rural Roads Asset Management System and Energy Efficiency and Demand-Side Management Grant.
Godongwana said the affected municipalities would not be able to implement their full budgeted plan against their programmes.
“Municipalities have to reprioritise the remaining funds against committed and shovel ready projects.”
He also said the entire R2.7bn was reallocated to fast spending programmes between best performing municipalities to other fast-moving projects in other municipalities.
The minister said the National Treasury considered persistent non-compliance to the Division of Revenue Act as a criteria to stop and re-allocate the funds.
“Anticipated underspending implies that transferred funds may lead to fiscal dumping and possible conditional grants misuse,” he said.
Godongwana said the National Treasury used the second quarter reports of the Section 71 of Municipal Finance Management Act for the period ending December 2022 and the monthly Division of Revenue Act (DoRA) reports received from the transferring officers as a benchmark to decide on municipalities that were underperforming against their allocations.
“The stopping process in terms of Section 18 of DoRA is purely performance based. This section stipulates that National Treasury may in its discretion or at the request of a transferring officer stop the transfer of schedules 4, 5 or 6 allocation if it is anticipated that a municipality shall substantially underspend on the conditional grants that are partially or fully funded by the allocation in the respective financial year.”
He stated that the National Treasury invoked the stopping and reallocation section in the DoRA on an annual basis as part of the monitoring work on the performance of municipalities.
“When this opportunity arises, municipalities that have improved on their performance and have lost their fund previously are given preference on the reallocation of the allocation in terms of section 19 of DoRA.”
Cape Times