Treasury defends decision to withhold funding from 69 municipalities

The Director General of National Treasury Dr Duncan Pieterse says the decision to temporarily withhold R13.5 billion equitable share transfer to 69 municipalities has been applied as a last resort. Pieterse says this a temporary move aimed at instilling fiscal discipline. National Treasury, led by Finance Minister Finance Minister Enoch Godongwana, briefed the Portfolio Committee on Cooperative Governance on its decision to withhold the money. Pieterse says: “And so the section 216 intervention to the minister’s point is a last resort that we used in cases where the other oversight and intervention responsibilities have failed to yield the intended results. In December last year, the National Treasury embarked on an extensive process of consultations with the affected municipalities that were in breach of the obligations in terms of the Municipal Finance Management Act and we gave them notices in September and in December last year that equitable shares could be withheld or stopped if they fail to take action to address them.” Dr Pieterse says initially, there were 99 municipalities out of the 267 in the country whose funding was supposed to be withheld. He however says the figure decreased to 69 because some of them complied with their revenue requirements. He adds that that the decision was done as a corrective and not as a punitive measure. “We confirm here that this action is a corrective measure by the Minister of Finance to halt financial declaration in municipalities and these are the municipalities that have consistently failed to comply with their obligations, and we will scratch that out later, despite the very expensive consultation we have undertaken and the notice that have been given in writing. The Minister of Finance has various tools provided for by the Constitution and the Municipal Financial Management Act which permit the minister to cut off funding temporarily to municipalities until they can prove that they are able to functions in accordance with their obligation.” Godongwana told the meeting that National Treasury is, by law, entitled to withhold equitable share transfer to municipalities. “Our view is that we are entitled to go up to 120 days for as long as Parliament has not said no stop. That’s why we write to Parliament and inform Parliament of our intentions for Parliament to convene and to decide on whether or not we can proceed and under what conditions we can do so.” Management of public funds under scrutiny – Zolile Williams: