The National Treasury is threatening to withhold the Nelson Mandela Bay municipality's equitable share over their failure to deal with unauthorised, irregular, fruitless and wasteful expenditure. (Photo: Deon Ferreira) 
The National Treasury has threatened to withhold the Nelson Mandela Bay Municipality’s equitable share payment for December in protest against failures by the metro to deal with R22-billion in unauthorised, irregular, fruitless and wasteful expenditure. This amount is the highest in the country.
The National Treasury delivered this warning during a meeting on Monday, after its earlier decision to reclaim R142-million in unspent conditional grants because the metro has had an acting city manager for longer than six months.
Withholding the equitable share – a key unconditional payment – could affect service delivery as this money is ordinarily used to provide basic services to all residents, assistance to poor households and cover the costs of basic municipal administration. The metro does have reserves, but lately has been running at a R1.58 billion deficit, necessitating the use of these reserves.
Member of the mayoral committee for treasury, the EFF’s Khanya Ngqisha, said in a video statement issued by the metro: “Of course, the issue of unauthorised, irregular, fruitless and wasteful expenditure and ‘us being the highest in the country’ that sits in our books was a major issue once again – the MPAC [municipal public accounts committee] chairperson and his committee formed part of the sessions. We have been warned by the National Treasury seriously; otherwise, we might not receive any grants, and this will affect service delivery,” he said.
“I think we have woken up – many of us who have not been taking the matters seriously – it was a wake-up call”.
‘Not surprised’
The DA’s Brendon Pegram said he was not surprised.
“We currently have more than R22-billion on our annual financial statements, and this is the highest in the country. The Treasury actually confirmed it yesterday in that dreadful meeting.
“They are definitely not happy with the municipality. The reality is that most of it relates to supply chain processes that were circumvented, which should be a massive concern to this municipality, and it is a massive concern to me. The fact that the Treasury wants to withhold our equitable share tranche for December should be a very serious concern,” he said.
“It would certainly have dire financial consequences for us.
“Trade losses have already reduced our reserves by half a billion rand. We have to stay in the Treasury’s good books. If they start to withhold grants and the equitable share, it can lead to us having cash flow problems in the very foreseeable future.
“We may have problems paying for our bulk electricity. I can confirm that no progress has been made in [sorting out] unauthorised, irregular, fruitless and wasteful expenditure in the last two years. It is a total mess. This municipality needs to get their act together,” he said.
Executive mayor Babalwa Lobishe unsuccessfully attempted in March to have R3.2-billion of irregular expenditure written off due to “limitation of scope” – meaning that it could no longer be investigated.
At the time, she claimed, the Treasury said that no documents could be found for R2.6-billion of the city’s irregular expenditure and suggested the council consider writing it off. However, in terms of legislation, before this can be done, there must be an investigation by the municipal public accounts committee.
ACDP councillor Lance Grootboom said at the time that the mayor had misinterpreted a letter from the Treasury, which “was never intended to suggest, advise or imply that the R2.6-billion [in] irregular expenditure could be processed by the municipal council without an investigation by the MPAC [municipal public accounts committee].”
There had previously been an attempt to write off R7-billion in irregular expenditure without a committee investigation. This was reversed by the Treasury.
Lobishe then withdrew her motion. Her report, attached to the council agenda, is identical for every department, except for the amounts to be written off. She alleged that the metro had lost hundreds of files dealing with expenditure, but gave no details on how the files “went missing”.
In August, the Nelson Mandela Bay municipal public accounts committee visited the DA-controlled City of Cape Town to learn from their counterparts there.
Current committee chairperson, UDM councillor Luxolo Namette, led a delegation of five councillors and four officials. According to a statement issued by the metro at the time, they sought to learn more about strategies on:
- How to stop unauthorised, irregular, fruitless, and wasteful expenditure;
- How to hold both officials and councillors accountable within the current legal framework; and
- Strategies on how the municipal public accounts committee could improve its planning and implementation of its mandated oversight role, and how to analyse and track municipal spending versus the budget and plans in place.
“We must admit that the CCT is one of the leading municipalities in implementing oversight on spending. The AG reports have confirmed this for the past few years. For us to improve, we need to learn from our counterparts for the benefit of our people,” Namette said at the time.
He indicated that they were working with the speaker of the NMB council and were in the process of beefing up the municipal public accounts committee office. DM