The National Treasury of South Africa is contemplating taking a firmer stance against municipal officials who do not adhere to the Public Finance Management Act (PFMA). Finance Minister Enoch Godongwana announced that the Treasury is exploring various enforcement measures to ensure municipalities comply with financial management requirements without penalizing residents who rely on municipal services. This move comes after the Treasury faced opposition from MPs when it withheld municipal funds as punishment for non-compliance.
In July, Godongwana was compelled to release municipal funds that the National Treasury had withheld due to non-compliance with the PFMA. MPs argued that withholding funds punished residents more than the responsible municipal officials. As a result, the Treasury is now considering alternative instruments to hold officials accountable. Godongwana emphasized that the decision to withhold funds was not taken lightly and that the Treasury is committed to finding more effective measures.
The KwaZulu-Natal (KZN) municipalities that had their funds withheld by the National Treasury included the Impendle Municipality in the uMgungundlovu District. According to Godongwana, only a handful of the 69 municipalities whose funds were withheld remain non-compliant. Despite this, these non-compliant municipalities have been allowed to access tranches of their conditional grants subject to meeting specific conditions.
The National Treasury is tightening the regulatory framework governing conditional grants to prevent municipalities from misusing the allocated funds. Godongwana stated that the Treasury is reviewing some conditional grants, with details of the proposed changes expected to be announced during the Medium-Term Budget Policy Statement (MTBPS) in Parliament on October 21. This review aims to prevent abuses and ensure that conditional grants are used for their intended purposes.
Godongwana also announced that the National Treasury is developing a system requiring municipalities to provide detailed information about their cost drivers. This process will be accelerated after the November 4 local government elections, once new leadership is appointed in the municipalities. The Treasury aims to ramp up the process and ensure that new councils operate strictly within funded budgets.
One of the practices the National Treasury has been working to end is the adoption of unfunded budgets by some municipalities. Godongwana emphasized that new councils will be expected to operate within funded budgets, and the Treasury will be monitoring their compliance. The Treasury's efforts aim to promote better financial management and accountability among municipalities.
The National Treasury's move to consider criminal charges against municipal officials who fail to comply with the PFMA reflects a more stringent approach to enforcing financial management requirements. With the MTBPS announcement approaching, the Treasury is expected to provide more details on its plans to review conditional grants and strengthen the regulatory framework. The outcome of these efforts will be closely watched by stakeholders, including MPs and municipal officials.
Key points
- The National Treasury is considering criminal charges against municipal officials who fail to comply with the Public Finance Management Act.
- The Treasury is reviewing some conditional grants to prevent municipalities from misusing allocated funds.
- A new system will be developed to require municipalities to provide detailed information about their cost drivers.
