The big story behind a leaked National Treasury letter to the City of Tshwane and other municipalities is not that local government is not spending grants and subsidies fast enough. The big story is that the national government has overspent on Eskom bailouts and salary increases. The result is an enormous budget deficit, which the national government plans to plug by defunding local government. Ahead of his budget speech this week, we ask the Finance Minister to think better of it.
Two weeks ago, the National Treasury warned the City of Tshwane that we were at risk of forfeiting about R630 million in unspent grants and subsidies. Before the City could respond, the letter was leaked to the media, providing several ANC politicians with ammunition against Gauteng’s only metro not being governed by an ANC coalition. Premier Panyaza Lesufi even threatened to intervene in the City of Tshwane on the strength of the letter.
Then we discovered that similar letters had been sent to municipalities across the country, including Gauteng’s other two metros. While allocations to municipalities have always been subject to annual reviews, the intended clawbacks have never been so big. Ekurhuleni stands to forfeit about R600 million, and Johannesburg a whopping R1 billion.
Of course, municipalities must improve their capital spending. The City is working hard to meet the Cape Town standard of spending or committing more than 90% of our grants and subsidies at midyear. This has to be done, like Cape Town, without incurring excessive irregular, fruitless and wasteful expenditure. It is no use paying invoices without installing a rigorous system of controls to ensure value for money.
But there is something else going on here: The Finance Minister’s budget speech and the enormous budget deficit he has to address this week. To plug the deficit, the national government looks to defund municipalities. The midyear budget already reduced local government’s funding by R3,6 billion, and the risk is that the Minister is coming for even more.
The two drivers of the deficit have little to do with municipalities: