Walmer township in Gqeberha is one of the informal settlements that stands to be adversely affected by the withholding of R440m in grants to Nelson Mandela Bay. (Photo: Deon Ferreira) 
The National Department of Human Settlements has informed the Nelson Mandela Bay metro that it will withhold R440-million in grant funding for its informal settlements because of severe underspending by the metro.
In a letter on 19 January, the National Department of Human Settlements informed the municipality of its intention to withhold payment of the Urban Settlements Development Grant (USDG) and the Informal Settlements Upgrading Partnership Grant (ISUPG).
According to the Treasury, the USDG is a supplementary, conditional capital grant allocated specifically for the eight metropolitan municipalities to support the development of sustainable, integrated human settlements.
The ISUPG is for the upgrading of informal settlements in partnership with communities. It focuses on providing essential services, security of tenure and site preparation for future housing.
The letter, signed by the Department of Human Settlements’ director-general, Dr Alec Moemi, asked the municipality to send a recovery plan indicating how it intended to address severe underspending.
The letter stated that the department had stopped the next tranche of payments to the municipality for the two grants as its recovery plans were “deemed dissatisfactory”.
Moemi pointed out that legislation allowed him to withhold the next payment to the metro for 30 days due to significant underspending.
Disheartening
The leader of the Mayibuye Civic Movement and former mayoral committee member for human settlements in Nelson Mandela Bay, Tukela Zamani, said it was disheartening that R440-million was being taken away from the poorest residents of the metro because of the incompetence of the political leadership and the callousness of senior management.
“Not long ago, the mayor boasted of a five-star rating for her administration, and I am certain that the management received top marks on their annual performance reviews. Yet, this is the only meaningful rating or review they truly deserve: failing the city’s most vulnerable. The funds intended to improve the lives of the destitute are leaving the city, and they should all be ashamed.
“This situation should not surprise us, however. The mayor herself has admitted that her attention is split between running the city and selling hair. I urge the residents of Nelson Mandela Bay to remember this when they are called upon to elect new leadership in the 2026 local government elections,” said Zamani.
Read more: Nelson Mandela Bay mayor says hair sales, not illicit funds, triggered Capitec compliance check
“Just yesterday [11 February], the mayor addressed the community of Grogro Informal Settlement and told them that the place they call home could not be developed because the municipality could not afford the land it is situated on. It is clear that Babalwa Lobishe misled these people.
/file/attachments/orphans/GrogroMayor1_714262.jpg "Nelson Mandela Bay Mayor Babalwa Lobishe and several high-ranking city officials met with residents of the Grogro informal settlement on 11 February after residents blocked a road to protest at their lack of electricity. (Photo: Riaan Marais)")
“She should have admitted that she has no clue what she’s doing. She should have told them that her administration has undone all the progress made in spending these grants during my tenure as MMC of human settlements,” said Zamani.
The ACDP’s Lance Grootboom said the decision would have a devastating impact on service delivery, particularly in informal settlements where housing, electricity, roads, sanitation and basic infrastructure were urgently needed.
/file/attachments/orphans/LanceGrootboom_650339.jpg "ACDP councillor Lance Grootboom. (Photo: Supplied / Lance Grootboom)")
“The Midterm Performance Report as at 31 December 2025 clearly shows the municipality’s failure to spend these grants effectively. Under operational transfers, only 61.9% of the USDG was spent, while a shocking 36.68% of the ISUPG was utilised. Under capital transfers, spending is even worse — only 23.4% of the USDG and 45.6% of the ISUPG were spent,” he said.
“These figures confirm gross mismanagement and a lack of political leadership within the current ANC-EFF-led coalition government. The poorest communities, many who are the constituents of the ANC and the EFF, are now paying the price for this incompetence through stalled projects and reduced service delivery.
“What is deeply troubling is that despite receiving this critical letter from the director-general of Human Settlements, there is no item on the Human Settlements Committee agenda scheduled for tomorrow addressing this.
“This demonstrates a lack of transparency and urgency from the executive. If these grants are not restored, the city’s financial position will deteriorate further, and service delivery will suffer even more. This is a clear indictment of an ANC-EFF coalition government that is failing to govern and failing the residents of Nelson Mandela Bay.”
Corrective action
Grootboom said immediate political accountability and urgent corrective action were needed to ensure that the funds were released to uplift poor communities and deliver dignity through housing and infrastructure.
Brendon Pegram from the Democratic Alliance said the DA had continually warned that the habitual underspending of grant funding would lead to more forfeiture of this funding.
“We have seen over the last two financial years that this city has sent back more than a billion rand in grant funding, and there is more to come. This is an indication of the inability of the administration to get its house in order,” said Pegram.
/file/attachments/orphans/Motherwell_818843.jpg "A street in Motherwell, Nelson Mandela Bay, has been flooded for months with sewage spewing from a blocked manhole. Despite growing health concerns, pleas from residents and the local councillor remain unanswered. (Photo: Supplied / Thanduxolo Doda)")
Pegram said the “revolving door” of acting city managers and the lack of permanent executive directors to monitor spending were exacerbating the problem and that the people of Nelson Mandela Bay were paying the price for this instability and the “absolute chaos” in council.
At the last city council meeting, held at the end of January, Lobishe proposed reallocating funds from the grants to different projects.
Some councillors objected on the grounds that Lobishe was doing this to divert money from DA wards to ANC wards.
The executive director of Human Settlements, Tabiso Mfeya, told the council that the department needed agility at this stage, “because if you don’t use it, you lose it’.
He said he wanted to reallocate money from the funds to different projects, but it could only be used for projects within the 2025/2026 business plan. He added that in the previous financial year, the department lost R241-million because the national government refused to approve its application for funding to be rolled over.
Part of the plan to avoid the forfeiture of the grant funding included diverting funds earmarked for a fence at the Arlington Tip and spending the money on transformers at several substations, electrical connections at the Bayland informal settlement, and road construction in another two informal settlements.
The metro has not yet commented on the letter from Human Settlements. DM