Nelson Mandela Bay races to meet Treasury deadline to protect equitable share grant

The Nelson Mandela Bay Municipality is under increasing pressure from the National Treasury after it failed to respond to a December directive on financial compliance, with the possibility that its equitable share grant could be suspended if it does not meet a 30 April deadline.

The National Treasury has begun the process of invoking Section 216(2) of the Constitution, which allows it to withhold or suspend funding to municipalities that repeatedly fail to comply with financial management rules.

The escalation follows the municipality’s failure to respond to an 8 December letter requesting the submission of key governance and financial documents within seven days. The letter was addressed to acting city manager Lonwabo Ngoqo, mayor Babalwa Lobishe and CFO Jackson Ngcelwane, with no response received.

The documents relate largely to the reduction and control of unauthorised, irregular, fruitless and wasteful expenditure (UIFWE), a key area of financial concern flagged by the National Treasury.

The intention to invoke Section 216(2) was confirmed by acting chief operations officer Lulamile Moolman at a Municipal Public Accounts Committee (MPAC) meeting on Thursday.

The issue divided councillors at Thursday’s MPAC meeting, with the ACDP and DA arguing that the documents should first be tabled before the committee. The ANC and EFF, however, supported Moolman’s position that the items should proceed directly to council, with MPAC considering only amendments to its terms of reference.

ACDP councillor Lance Grootboom submitted questions to the office of the acting city manager in line with council rules of order, raising concerns about inaccuracies and compliance issues in the documents due to be approved by council on 28 April.

“The current report, together with its attached annexures (documents to Treasury), did not serve before any committee for prior consideration and oversight. Accordingly, council has not had the benefit of the necessary committee process, and there remain a number of clarity-seeking questions in relation to the annexures attached to the item.”

He said the information requested was necessary to enable the council to properly consider the item, assess whether the documents placed before it were complete and lawful, and determine whether the municipality’s response to National Treasury was credible, compliant and institutionally sound.

“The information is requested to enable council to properly discharge its oversight responsibilities, to assess the completeness and lawfulness of the documents placed before it, and to determine whether the municipality’s response to National Treasury is procedurally proper.”

At the MPAC meeting, Moolman told councillors that of the 10 documents required by the Treasury, the committee would deal only with the terms of reference, and that councillors could access and review the remaining documents after they had been approved by council.

“We are dealing with the response to the letter from National Treasury to the City in December which deals with a number of aspects that relate to the City retaining its equitable share. National Treasury has indeed started the process with the intention to invoke section 216 (2) of the Constitution, where, due to noncompliance with the Municipal Finance Management Act (MFMA), the City stands to lose a portion of its allocation,” Moolman said.

He said in the previous MPAC meeting on Monday last week that there had been a misunderstanding about what items should go to MPAC.

“If you read the letter, it contains a list of items the City had to satisfy. It talks about the review of the processes and mechanisms that control the escalation of the metro’s UIFWE bill. It also talks to us being able to review the MPAC terms of [ensuring] their compliance according to Section 79 (a) of the Municipal Structures Act. The work we did was to ensure the terms of reference that MPAC is utilising are compliant. Therefore, the purpose of this meeting is for us to discuss MPAC aligning its terms of reference with section 79 (a).”

DA councillor Gert Engelbrecht asked whether Moolman meant that the UIFWE-related items would not be discussed.

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“Am I understanding him correctly that he is saying we will only deal with the MPAC terms of reference. So what will happen with the UIFWE policy, disciplinary board and consequence management policy framework? Will that directly go to council without being discussed here first?

“It seems as if the municipality just wanted to take chances and let us rush through all of these documents. They were taking chances by sending those documents to see if we will push them through to council. That’s what it looks like, and has become the norm in this municipality.”

‘Erroneously circulated documents’

Moolman responded that the documents to Treasury were erroneously circulated to councillors after a council meeting was called for Tuesday last week, but was abruptly postponed on Monday.

“Those documents were meant to go through the necessary structures of council before going to council. Councillors will be afforded the opportunity to interact with the documentation as required by our processes, but when it comes to policy, the process does not start at MPAC.”

Grootboom said he was at the meeting with Treasury when the City was told about stopping the grant fund.

“I know what was said. Indeed, all of these documents need council approval; however, the majority are aligned to the UIFWE. The Treasury official said MPAC must have sight of the documents before they’re approved. When you look at the reduction and prevention strategy, all these documents are part of the strategy, so it’s important for us to discuss them first.”

He said the reason the council meeting was postponed last week was that he had requested that speaker Eugene Johnson engage the Treasury to ask for an extension on the deadline submission, because MPAC was not aware of their December letter.

ANC councillor Xolani Notshe said the metro’s failure to respond to the letter placed it at risk.

“The failure to respond to the Treasury is institutional. Now, we face an issue where monies to the City stand to be withdrawn. It’s difficult to understand that we are reminded by the Treasury that all these policies need to be reviewed.

“I believe that primarily, it’s the terms of reference that we must deal with, and present them to council so we comply.”

EFF councillor Siyabulela Mosi agreed that the committee had to deal only with the terms of reference.

The amended terms of reference were adopted despite opposition from the ACDP and DA. DM