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The National Treasury has tightened the financial noose around the Nelson Mandela Bay municipality, temporarily withholding its July equitable share tranche allocation.
This is because of challenges regarding persistent financial mismanagement, weak governance and repeated failures to comply with the Municipal Finance Management Act (MFMA).
The equitable share for the 2026/2027 financial year is R1.74bn.
It is unclear what the amount of the first tranche is.
The move places the metro among dozens of municipalities nationwide flagged for allegedly failing to curb billions in unauthorised, irregular, fruitless and wasteful expenditure, enforce accountability and maintain basic financial discipline.
On Tuesday, the National Treasury issued a media statement.
The Buffalo City municipality has also not been spared, with the metro under threat of losing its equitable share allocation for the current financial year that started on July 1.
The equitable share helps municipalities fund basic services for poor households and support administrative costs.
Other municipalities in the province facing a similar problem are Sundays River Valley, Makana, Inxuba Yethemba and Port St Johns.
“The decision follows persistent and serious noncompliance with the MFMA and its supporting regulations, despite support provided by the National Treasury through guidance, engagement and formal or informal communication,” the notice reads.
“The 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.
“They were also given a platform to send, in writing, reasons why their funds should not be withheld.”
The temporary withholding of funds is done in terms of Section 216(2) of the constitution and Section 38 of the MFMA.
“It is important to note that this is a corrective rather than punitive measure.
“Because the withholding of the funds will be for a short-term period, the National Treasury does not foresee any impact on service delivery.”
According to the National Treasury, the Bay’s equitable share has been withheld because the city has failed to address unauthorised, irregular, fruitless and wasteful expenditure (UIFWE) and implement consequence management.
The National Treasury said despite years of support, including MFMA guidance circulars, direct engagements and training, many municipalities continued to flout financial management laws.
It said municipalities were still adopting unfunded budgets, failing to address UIFWE and neglecting their statutory financial obligations.
The National Treasury warned that these failures amounted to a breach of fiduciary duty by political and administrative leaders, which threatened the financial sustainability of key institutions such as Eskom, water boards, the auditor-general, Sars and the Financial Sector Conduct Authority.
It said persistent UIFWE reflected weak governance and directly undermined service delivery, with unpaid service providers resulting in mounting interest charges, penalties and further disruptions.
“Some of the affected municipalities have failed to process UIFWE as required by Section 32 of the MFMA,” the National Treasury said.
“Section 32 of the MFMA provides that a municipal council must recover UIFWE from the persons liable therefor unless, after investigation by a council committee, the expenditure is certified as irrecoverable and written off.
“The council committee referred to in Section 32 is the municipal public accounts committee (Mpac).”
In the metro, Mpac has struggled to obtain reports from directorates responsible for UIFWE.
The last time the city dealt with UIFWE and wrote it off was in December.
Recently, Mpac chair Luxolo Namette wrote to acting city manager Lonwabo Ngoqo demanding that officials be held accountable.
On Tuesday, Namette said Mpac had done everything to try to reduce the figure.
“We continue going to meetings but there are no reports for us to interrogate,” Namette said.
“Officials are not submitting reports.
“Consequence management lies in the office of the city manager.
“If the equitable share is not paid over we’re going to blame the acting city manager because he is the one meant to ensure accountability.
“Mpac sits but without reports.
“The acting city manager must tell us what’s happening.
“Our hands are tied as politicians.”
During a May appearance before parliament’s co-operative governance and traditional affairs portfolio committee, Treasury MFMA implementation unit chief director Wayne McComans said the years of support provided to the Bay were not bearing fruit, despite threats of withholding funds.
ACDP councillor Lance Grootboom said the coalition government had collapsed the metro’s finances.
“Nelson Mandela Bay now has the worst record for irregular spending in the entire country,” Grootboom said.
“The ACDP has requested updates on the UIFWE register over and over again but the CFO and the administration have completely failed to provide an accurate, updated register.
“The ACDP has been highly vocal, demanding that these financial matters be brought to Mpac for proper investigation.
“Instead, the administration continues to hide these files and the ANC-led coalition lets it get away with it.”
Grootboom said the city’s own UIFWE reduction strategy had promised to clean up and write off 10% of the historical debt by June 30, which did not happen.
Finance MEC Mlungisi Mvoko said municipalities were well aware of the consequences of noncompliance but had been slow to address persistent shortcomings despite ongoing support from the provincial and national treasuries.
“The withholding of funds is not an ideal solution for the province if you consider the serious service delivery challenges we continue to face,” Mvoko said.
“We, however, remain hopeful that the move will not harm service delivery as it is temporary in nature.
“Even the National Treasury acknowledges that aspect.
“The mayors must present this to council with responses indicating how they are going to address the matters raised by the minister.”
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