Co-operative Governance and Traditional Affairs Minister Thembi Nkadimeng has defended the withholding of R3.4 billion in equitable share allocation from municipalities after failing to spend the allocated funds.
Responding to DA MP Gizella Opperman, Nkadimeng said despite a provision in the Public Finance Management Act or the Municipal Finance Management Act, the Division of Revenue Act provided that any conditional allocation that was not spent at the end of a financial year reverted to the National Revenue Fund unless the roll-over of the allocation was approved.
“The National Treasury may, at the request of a transferring officer, receiving officer or Provincial Treasury, approve a roll-over of a conditional allocation if the unspent funds are committed to identifiable projects,” she said.
Nkadimeng said in the 2022-23 financial year, an amount of R87.3bn was allocated for the Local Government Equitable Share grant to all 257 municipalities.
“A total of R83.9bn was transferred to the municipalities, leaving a balance of R3.4bn at the end of the financial year.
“The R3.4bn was not withheld to municipalities, but was rather offset against unspent conditional grants of municipalities that failed to surrender their unspent allocations to the National Revenue Fund.
“The offsetting of the R3.4bn was as per the National Treasury directive,” she said.
Earlier this year, the National Treasury stopped R2.7bn in transfers in conditional grants to municipalities from the R7.4bn.
Finance Minister Enoch Godongwana said the withholding of transfers to municipalities was an annual practice which has been institutionalised over the last 10 years to maximise spending and effectiveness of conditional grants.
The National Treasury initiated the stopping and re-allocating the 2022/23 conditional grant allocations in terms of the Division of Revenue Act in February.
“The National Treasury issued 171 letters to all underperforming municipalities on 17 February 2023 covering about 11 conditional grants that were reflecting underperformance against the 2022/23 conditional grant allocations.
“This process was done in consultation with the transferring national accounting officers or departments that are responsible for the administration of the conditional grants.”
Godongwana said the 2022-23 midyear expenditure reports were utilised to determine if the municipalities were underperforming against their allocations as they report to both National Treasury and the transferring officers.
“The affected municipalities were afforded an opportunity to make a written presentation to the National Treasury, by providing a motivation on why the grants should not be stopped.
“The municipalities were required to submit the motivation to the National Treasury within seven days after the receipt of the letters regarding expenditure against their allocations and project progress on the ground.”