The National Treasury has withheld more than R267m in critical grants for the Nelson Mandela Bay municipality, with the department warning that years of support and intervention had done nothing to help.
The decision to withhold the grants was made in February.
The move follows repeated warnings from the Treasury over the metro’s persistent underperformance, non-compliance and failure to curb irregular expenditure, with officials saying years of support and intervention had done nothing.
The letter was revealed by parliament’s co-operative governance and traditional affairs portfolio committee chair Zweli Mkhize at a meeting with the city’s leadership on Thursday.
The city has become notorious for having grant funding withheld.
During the discussion on grant expenditure, Mkhize brought up a February 13 letter from Treasury deputy director-general for intergovernmental relations, Ogaleletseng Gaarakwe, notifying the municipality of their intention to stop funding due to underperformance and non-compliance.
These were for the Informal Settlements Upgrading Partnership Grant (R23.7m), the Urban Settlements Development Grant (R129.8m), the Energy Efficiency Demand Side Management Grant (R3.9m), and the Regional Bulk Infrastructure Grant (R110m).
The Treasury has also threatened to, but not withheld, the Public Transport Network Grant (R119.6m) and the Expanded Public Works Programme funding (R7,730,000).
Gaarakwe wrote that the letter was a formal notification by the Treasury of its intention to stop the above allocations in terms of section 18 of the 2025 Division of Revenue Act and section 38 of the Municipal Finance Management Act.
Human settlements political head Thembinkosi Mafana said as far as he was aware, the city had responded to all the letters from the Treasury on threats to withhold grants.
“There’s not a single letter we didn’t respond to.”
Mkhize questioned whether the city had received any of the grants.
Mafana said the only matter brought to his attention was a response from human settlements minister Thembi Simelane, who expressed dissatisfaction with the city’s replies and indicated that she would withhold certain grants as a result.
“The letter the mayor showed me the day before yesterday contained only one grant.”
Mkhize asked why the grants had been withdrawn.
“If you were to answer the minister or DG of Treasury, and they say they’re not satisfied with your response. Why are they not satisfied?”
Mafana said after receiving the letter from the Treasury, they had initiated processes and solicited the Housing Development Agency’s (HDA’s) help to speed up the building of houses.
“There was a process undertaken to make use of the Coega Development Corporation and HDA because the one challenge we have as a metro is expiry of contracts, which were supposed to be used to implement service delivery.”
Mkhize asked Bay CFO Jackson Ngcelwane to explain what he did when he saw the grants were being withheld.
“You’re the CFO, you can’t be shocked. Your monitoring must tell you, you won’t spend this money, and what did you do?”
Ngcelwane confirmed certain grants were withheld.
“The problem is that business plans are approved in a financial year rather than in the previous one.
“What we did in July last year, because there were no approval letters from the minister, we wrote to the minister where we were requesting earlier approval of the business plan, so we can start spending.”
ANC MP Nombiselo Sompa-Masiu asked Mafana for a detailed explanation on grants being withheld. “Why are you not so certain about the explanations you’re giving us?” Sompa-Masiu said.
MK Party MP Sanele Mwali said the withholding of grant funding was a serious matter.
“When you look at the living conditions of the people of this province, this is equal to spitting in their faces.
“If you’re going to be withholding more than R100m when there are people living in shacks as we speak, and this municipality is meant to be building houses for them.
“The reason for withholding is not spending, and the reasons for not spending are political issues and then the people who will bear the cost of someone’s decision in the city are the people meant to receive services.
“These are the lives of the people, people we represent. The municipality is meant to provide them services through these grants,” Mwali said.
Mwali said the city, unfortunately, did not have a city manager to account for, accusing Mafana of not performing.
“Why do you have such an MMC (member of the mayoral committee) who is not performing, and there are no consequences?”
PA MP Santes van Wyk accused Bay mayor Babalwa Lobishe of sitting back when funds were being sent back to the Treasury.
“She’s so relaxed, like there are no problems there, and what is the provincial department of Cogta doing on consequence management?”
MK Party MP Glen Taaibosch said the money sent back to the Treasury was not a saving.
“This is underperformance, poor performance, and not doing things meant to be done.
“We were in Gqeberha ... the roads are bad, sewage is overflowing, and it’s not like the people don’t need this money.”
Mafana said not all the grants tabled were used by his department.
“Once the grants are received through human settlements, they are dispersed to various departments of the metro.”
During the meeting, Treasury MFMA implementation unit chief director Wayne McComans spoke on evergreen contracts.
The city has 22 contracts dating back to 2004.
McComans said the issue of evergreen contracts had been a concern for the past decade.
“We’ve been working with the municipality and, over time, have phased out the contracts that were concluded before the Municipal Finance Management Act phased in.
“We’ve been trying to help the municipality with consequence management so that it becomes the norm. We’ve supported the municipality to the extent that we’re able to, which is why we’ve reached a stage where we’ve asked ourselves, do we persist with the current modus operandi?”
McComans said towards the end of last year, the Treasury had informed the municipality of its intent to invoke section 38 of the MFMA, read with sections 2 and 6 of the constitution.
“We are of the view that supporting the city is not bearing fruit. We were there about two weeks ago and told them, despite the letter that was written in December, that there’s been no traction on any issues, be it a reduction in irregular expenditure, or consequence management.
“Despite going the route we’ve gone, we’ve not closed the door on the municipality. But support has a start and an end date,” said McComans.
The Herald
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