While residents continue to endure chronic water shortages, electricity cuts and crumbling roads, municipalities across South Africa forfeited R1.5 billion in unspent municipal infrastructure grants over the past three years due to poor planning and lack of capacity.
According to the National Treasury, all unspent funds returned to the National Revenue Fund (NRF) were due to non-compliance issues with violations varying across municipalities.
The Treasury said municipalities are beset by “issues around lack of capacity to manage the planning and implementation of projects, as well as lack of financial management, where conditional grant funds are used for purposes other than the intended purpose”.
The allocations to municipalities include the Municipal Infrastructure Grant, Public Transport Network Grant, Regional Bulk Infrastructure Grant, Urban Settlement Development Grant, and the Water Services Infrastructure Grant (WSIG).
Three local municipalities - Kannaland in the Western Cape, KwaDukuza in KwaZulu-Natal and Ditsobotsa in the North West were among many municipalities flagged for contract management failures in the Auditor-General report for 2024/2025 released in June.
The troubled Ditsobotla municipality has been under national intervention in terms of Section 139(7) due to governance failures, financial mismanagement and collapsed service delivery.
Co-operative Governance and Traditional Affairs Minister Velenkosini Hlabisa made an official visit last week to the municipality to assess progress under the Section 139(7) intervention.
Hlabisa said a report by the National Cabinet Representative shows encouraging progress in stabilising governance and administration, with a now-functional municipal council, approval of several outstanding policies and significantly improved cooperation between local, provincial and national government.
This is despite recent reports that residents have lamented worsening service delivery since the intervention eight months ago, pointing to chronic water shortages, electricity cuts and crumbling infrastructure.
The Auditor-General flagged Ditsobotla after it budgeted R16.93 million to upgrade 2.9km of roads and stormwater infrastructure in Itsoseng township by January 2022, but spent over R21 million without completing the project.
Of this, R2.66 million was paid to a first contractor whose contract was terminated for poor performance, and R18.34 million to a second contractor by March 2025, forcing the appointment of a third contractor.
The Treasury said that all municipalities that lost funds or had funds returned to the NRF “is due to non-compliance issues that vary from municipality to municipality, and each year you will find different municipalities losing funds or having funds returned to the NRF”.
The Treasury further stated that it undertakes other concrete interventions beyond withholding or stopping allocations in terms of Section 18/19 of the Division of Revenue Act (DORA).
“Together with departments administering conditional grants, the National Treasury allows for various types of interventions, starting with the Invoice Verification process system wherein an invoice on work done is first verified by the department responsible for the Grant (i.e MIG is administered by the Department of Cooperative Governance),” it said.
Secondly, Treasury said funds are converted from a Schedule 5B conditional grant, paid directly to the municipality, to a Schedule 6B grant, which is administered and spent by a national department on behalf of the municipality.
Lastly, funds earmarked for struggling local municipalities are reallocated to district municipalities to implement projects on their behalf.
“These initiatives aim to ensure the intended recipients of the services derived from these conditional grants are not deprived of the benefit,” the Treasury said.
Additionally, technical support is provided to municipalities in various forms to municipalities from financial, institutional, governance and technical support through National Treasury entities like the Government Technical Advisory Centre, and technical support through the Department of Cooperative Governance’s Municipal Infrastructure Support Agency.
Experts cautioned in Sunday's edition of The National that withholding grants as a disciplinary measure may look financially prudent, but it punishes communities rather than the officials responsible for failures.
Professor Purshottama Sivanarain Reddy, a public governance specialist at the University of KwaZulu-Natal, said: “It does punish citizens further. The local citizenry has not received satisfactory basic services, and is being punished further, and it is not of their making. They are being punished twice – no or poor basic service and the withholding of that grant, which means they are unlikely to receive the service or a minimum provision of it.”
Political commentator Rebone Tau agreed that financial penalties ultimately harm vulnerable residents.
“We need the National Treasury to put the interests of communities first and focus on finding sustainable solutions. The fundamental question for me is: if you stop or reduce funding, what is the alternative? You cannot simply withdraw resources without providing a credible solution to the underlying problems.”
But the National Treasury countered that by the time it intervenes service delivery has already deteriorated because municipalities either fail to spend conditional grants or divert them from their intended purpose.
"Rather, the withholding and stopping of funds prevented grant misuse and fiscal dumping, as these funds would end up not being spent or spent on other purposes other than the intended purpose,” it said.
The Treasury further said it is currently reviewing all conditional grants.
“The review of the conditional grants system seeks to provide an in-depth review of South Africa’s intergovernmental fiscal framework, focusing on the structure, efficiency, and reform of conditional grants across all spheres of government. The review outlined milestones, literature findings, cross-cutting challenges, and detailed reform proposals for both provincial and local government conditional grants, aimed at improving coherence, efficiency, and impact in public expenditure,” it said.
Commenting on municipal infrastructure problems, Professor William Gumede of Wits University’s School of Governance said the erosion of technical skills in local government was directly linked to the deterioration of basic water, sanitation and road infrastructure.
“Politicians don’t understand the importance of infrastructure and it is not just an ANC phenomenon,” he said.
Gumede added that failure to prioritise infrastructure development remains a major impediment to economic growth.
“You look at our public debate on the economy, very few people talk about infrastructure as being at the heart of economic growth, job creation and poverty reduction,” he said.
rapula.moatshe@thenational.co.za