Minister of Finance Enoch Godongwana intends to invoke a section of the Constitution that allows the National Treasury to withhold transfers to provinces that owe municipalities.
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Finance Minister Enoch Godongwana has lived up to his promise of acting against the government departments that owe municipalities a whopping R15 billion in unpaid rates and services for water and electricity.
Godongwana has now set his eyes firmly on the provinces for placing strain on municipal sustainability and service delivery by not paying their debts.
This was disclosed by Godongwana when he wrote to Parliament informing it of the National Treasury’s intention to invoke Section 216(2) of the Constitution to withhold provincial Equitable Share transfers to the implicated provinces.
He cited “persistent and material non-compliance by provincial departments in settling municipal property rates and service charges, including charges relating to water, electricity, sanitation, and other related municipal services owed to municipalities”.
The letter emerged in the parliamentary communique known as Announcements, Tablings and Committee that was published on Thursday.
It has been referred to the Select Committee on Finance for consideration while provinces have an opportunity to pay up or have their Equitable Share Allocation transfers withheld.
DA MP Dennis Ryder, a member of the select committee, welcomed the National Treasury's decision to invoke Section 216(2) of the Constitution and potentially withhold provincial Equitable Share allocations from provinces that continue to default on payments owed to municipalities.
Ryder said the DA has for years argued that accountability in public finance cannot be selective.
“Government departments cannot expect residents and businesses to pay their municipal accounts while the state itself accumulates billions in unpaid debt.”
He noted that provincial departments owe municipalities almost R15 billion, with more than R8.5 billion outstanding for over a year.
Ryder also said provincial government departments were among the largest debtors owing many struggling municipalities and recovering these funds could provide immediate relief to municipalities battling to maintain roads, keep water flowing, and keep the lights on.
“Consequence enforcement must mean more than strongly-worded letters. Provinces that fail to meet their legal obligations must face real consequences,” he said.
Last month, Godongwana told Parliament that municipalities have been accusing him of bias for deducting funds directly from municipal allocations when they owe organs of state, whereas the same principle has not been consistently applied to national and provincial departments that owe municipalities outstanding amounts.
He said the National Treasury has taken a decision to deduct monies from national and provincial departments to settle outstanding debts owed to affected municipalities.
According to Godongwana, Director-General Duncan Pieterse had written to the departments warning that if they did not pay municipalities, the National Treasury will make deductions from their allocations.
Godongwana said the National Treasury has quantified the amount owed to the municipalities.
“Provincial governments owe about R14 billion. The national government owes R8.2 billion. That takes us to R22 billion, which is owed to municipalities,” he said.
“We intend to make sure that money is transferred back to municipalities,” said Godongwana when he tabled the budget vote in the National Assembly.
The minister had stated that the provincial debt owed to municipalities continued to place a strain on municipal sustainability and service delivery.
It was reported earlier this week that the debt owed by struggling municipalities to water boards has ballooned by almost R4 billion, reaching R28 billion over the past 10 months.
Water and Sanitation Minister Pemmy Majodina said municipalities blamed the non-payment on consumers, including departments, for not servicing the debt.
In an effort to make the defaulting municipalities cough up, the Department of Water and Sanitation requests the National Treasury to withhold Equitable Share allocations to defaulting municipalities.
The department previously said it used the withholding of the allocations as a last resort to force the councils to honour their obligations by paying their current invoices prior to their allocations being released by the National Treasury.
However, Majodina said the defaulting municipalities generally pay upon entering into payment agreements and two months down the line abscond, a move that forces the department to again approach the National Treasury to withhold the Equitable Share.
“We have already made a submission regarding close to 16 municipalities that are just not paying the water boards.”
Majodina stated on Wednesday that they have urged municipalities to apply what her department was doing regarding the direct deductions from their municipal allocations.
“They must ensure that the departments that owe them... that their budgets are withheld by the National Treasury, because if they do that, we know we are going to benefit and our water boards are going to be paid,” she said.