Parliament’s co-operative governance and traditional affairs portfolio committee is moving to close a gap in the rules governing the National Treasury’s power to withhold municipal funding after 69 municipalities, including Nelson Mandela Bay, were caught in a financial squeeze.
The National Treasury withheld the municipalities’ equitable funding on persistent governance failures and noncompliance with legal financial management requirements.
The move comes as the Bay’s municipal watchdog continues to battle to obtain information on billions of rand in unauthorised, irregular, fruitless and wasteful expenditure (UIFWE), raising questions about how effectively the municipality is addressing the problems that landed it in the Treasury’s sights in the first place.
The portfolio committee resolved on Tuesday to ask speaker Thoko Didiza to initiate joint rules setting out how parliament should deal with future interventions under Section 216 of the constitution.
Committee chair Zweli Mkhize said the recent withholding of funds had exposed uncertainty over parliament’s role, including how the National Treasury and affected municipalities should be heard and how quickly parliament should decide whether a withholding should continue.
“We need rules setting out what the next step is,” he said.
The committee resolved to write to Didiza requesting new rules for a clear parliamentary mechanism for dealing with Section 216 interventions, including the formation of an ad hoc committee where necessary.
Mkhize said interventions aimed at ensuring municipal compliance should not cause further hardship to vulnerable communities who had no role in municipal maladministration.
“On the one side, we do want municipalities to comply. On the other side, we want services to be protected, particularly for the poor,” he said.
Mkhize said some of the affected municipalities had received funding, while the National Treasury continued working with them to resolve outstanding compliance matters.
Nelson Mandela Bay’s equitable-share allocation for the 2026/2027 financial year is R1.74bn.
It is normally paid in three tranches.
The Treasury withheld its July tranche after citing persistent noncompliance with the Municipal Finance Management Act and failures to address UIFWE.
The city has since received a portion of the withheld funding.
The metro’s municipal public accounts committee (Mpac) has repeatedly raised concerns about reports dealing with UIFWE not being submitted to the committee.
Councillors and Mpac chair Luxolo Namette have written to the city manager’s office to raise these concerns.
ACDP councillor Lance Grootboom said he was concerned that the Treasury had been forced to withhold funding because municipal leaders had failed to fix long-standing governance problems.
“While politicians in parliament discuss technical legal rules around withholding funds ... the truth for ordinary residents in our metro is simple,” Grootboom said.
“Council leadership is failing to address basic administrative chaos and local communities are paying the price with poor service delivery.”
He said the city’s suspended city manager remained on full pay with her disciplinary matter unresolved while executive director positions were vacant or filled by acting officials.
Grootboom said Mpac was also unable to deal with UIFWE because management was failing to submit the required Section 32 reports.
He said a UIFWE prevention and reduction strategy adopted by council in April had set deadlines for cleaning up the municipality’s finances but these had not been met.
DA councillor Gert Engelbrecht said he had first raised concerns about UIFWE and its impact in December 2025, when it was approaching R30bn.
He warned that the municipality needed to address the backlog urgently, cautioning that failure to do so could put its equitable-share funding at risk.
“Those warnings were not acted on with the urgency required and this year the municipality experienced delays in receiving its equitable share,” Engelbrecht said.
“Despite these warnings, Mpac still cannot obtain a comprehensive UIFWE register showing what was spent, who was responsible, what was investigated and what consequence management followed.
“On May 26, I wrote to the National Treasury, Cogta, the speaker and the acting city manager raising these concerns.
“To date, I have received no meaningful response and Mpac has still not received the register.”
Engelbrecht said council had recently been presented with information on the proposed write-off of about R7.8bn in UIFWE.
“Yet council was not provided with a proper breakdown explaining exactly what makes up this R7.8bn, when the expenditure occurred, why it was written off, who was responsible or what consequence management followed,” he said.
“How can R7.8bn be written off without proper answers?
“I have therefore submitted a motion of exigency to Mpac demanding that this matter be urgently considered.”
Namette said that, if implemented, the rules would provide clearer guidelines on how municipalities ended up with their grants withheld.
“It cannot be correct that it is only the National Treasury that decides without a clear legislative framework as we must all be guided legislatively as per the principles of a constitutional democratic system,” he said.
“In the meantime, it is imperative for us to deal decisively with the matters that put us in the National Treasury’s naughty corner.
“Through Mpac, good work has been done but there is still more work before us.”
Municipal spokesperson Sithembiso Soyaya confirmed the city had received a batch of its withheld equitable funding.
He said the city was paid R725,210 on July 31, with the priority being to ensure the funding was translated into lawful and effective expenditure in line with the approved 2026/2027 budget and service-delivery priorities.
Soyaya said the municipality supported efforts to provide greater clarity around parliament’s role in Section 216 interventions and believed clearer rules would strengthen oversight while protecting essential services.
He said the municipality recognised the need to manage public resources responsibly, comply with legislation, strengthen financial controls and address identified weaknesses.
“For the municipality, this means taking responsibility for improving both financial governance and expenditure performance,” Soyaya said.
“The municipality is focused on ensuring that available funding is converted into implementation, infrastructure, maintenance and services that residents can see and experience.”
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