Tshwane speaks out on threat of withdrawal of state subsidies

With only days left until Finance Minister Enoch Godongwana delivers his budget speech, National Treasury has issued the following notice to several local governments due to lower-than-expected tax revenues and myriad spending demands in an election year. It has come to be known that Millions of rands are set aside as conditional grants allocated to defined projects.

Apart from the R630 million the City of Tshwane could lose, the City of Joburg could lose an eye-watering R1.1 billion, Ekurhuleni could lose R607 million and Nelson Mandela Bay could lose R523 million. There is.

The letter to Tshwane was published on social media platform

Mehpa did not say anything about the state's other two metros being in the same predicament.

However, he also “revealed” on social media platforms that Brink was resigning.

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Mr. Brink immediately replied:

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Brink says the real issue here is that central government doesn't have the money and is currently trying to keep part of the amount agreed with local authorities.

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The National Treasury did not say how many similar letters had been sent, saying that discussions with local governments “are still ongoing, so we are unable to respond at this time.”

Local authorities have seven days to respond to the February 12 letter with a list of information requested by the National Treasury and why the estimated amount should not be withheld. You must also indicate the amount you think is appropriate to withhold.

“Money is not being spent”

In a letter seen by Moneyweb, National Treasury said Mr Joburg and Mr Ekurhuleni had disbursed less than 45% of the subsidy by the end of last year, three-quarters of the way into the municipal financial year, and Mr Tshwane and Nelson Mandela.・Mr. Bey states that he has spent the money. Less than 40%.

In a statement, Eastern Cape ActionSA lead candidate and former Nelson Mandela Bay mayor, Athol Trollip, said in a statement that the Metro is committed to funding given the important role these grants play in the development of the Metro. He said losing it would be devastating. -Be a resident”.

Read: Insolvent and insolvent local authorities saddled with R79-billion debt pile leave Treasury in dire straits

In a statement on Sunday, the City of Tshwane said it had made “thorough, detailed and comprehensive submissions on how it intends to use the grant allocation by the end of this financial year”.

It said it had informed the National Treasury that it had developed a recovery plan to ensure the acceleration of subsidy disbursements and explained the reasons for the unsatisfactory performance up to December 31, 2023.

The important elements are:

• Migration from old financial management system to new financial management system. This affected the processing and accounting of expenditures.
• The Urban Settlement Development Grant (USDG) and Informal Settlement Improvement Partnership Grant (ISUPG) were reduced in the second quarter as directed by the National Treasury, requiring early review and repackaging of many programs to accommodate the reductions. It became.
• A prolonged and unprotected labor strike had a major impact on project implementation and monitoring.
• Delays in the early stages of procurement (specification approval and bid advertisement).and
• delays in the appointment of contractors to provide electrical cables and spare parts; delays in lead times for the supply and delivery of materials for power projects;

According to the city, these factors have been resolved.

The city said it had “made significant progress on most projects by issuing letters of appointment and entering into contracts with designated service providers.”

read:
Mr Tshwane misses deadline to submit financial statements
City of Tshwane plunges deeper into debt

Considering current expenditures and February 2024 commitments, the transferred tranche has been exhausted.

“Starting in early March, the City will face a severe funding shortfall in terms of payments to contracted service providers. Therefore, to alleviate this challenge, the final tranche will be disbursed by the end of March 2024, in accordance with the approved payment schedule.” You need to send the money by.”

It said that by the end of January 2023, 84% of the transferred funds had been used.

Tshwane Threat of suspension of local bonds

Meanwhile, the City of Tshwane is awaiting a response from the JSE, which has threatened to suspend trading in the municipal bonds unless audited financial statements are submitted by the end of this month. The original deadline for statements for the 2022/23 financial year was 31 January.

Such a suspension would constitute an act of default and could give bondholders and other financiers the right to call on loans given to Subway.

Mr Brink told Moneyweb that newly appointed CFO Gareth Mnisi had gone to meet with JSE officials and had received a shocking adverse audit opinion from the Auditor General (AG) a year ago. He said the city explained that it was working to rebuild and improve the system in response to the issue.

This requires further work on the financial statements, resulting in a delay in submission to the AG and the financial statements not yet being available.

Brink said the AG's office has committed to completing the audit by the end of February, finalizing the letter of administration by mid-March and submitting an audit report by the end of March.

He hopes the audit results will improve, but hopes the audit will qualify as it will take more time to correct the valuation of property, plant and equipment, one of the issues the AG previously flagged. .