JOHANNESBURG, GAUTENG — The Johannesburg funding crisis has reached a critical juncture as National Treasury moves to withhold vital municipal grants, citing a completely unfunded budget and severe financial mismanagement. With Finance Minister Enoch Godongwana issuing a final notice to the metro, governance experts are warning of severe service delivery consequences unless drastic corrective measures are implemented immediately to restore the municipality’s financial credibility.
Missed Deadlines and a Deepening Fiscal Hole
The municipality recently faced a strict deadline to address National Treasury’s concerns regarding its financial trajectory. While city officials declined to comment on the matter while the process is underway, governance expert Professor Alex van den Heever notes that the metro was highly unlikely to have met the deadline without scrapping its recently passed, unaffordable budget.
According to Van den Heever, the root of the crisis lies in the city’s commitment to roughly 10 billion rand in additional expenditure. This massive financial leap includes plans to hire an additional 1,500 to 2,000 personnel without a credible revenue stream to support them, all while sitting on a massive debt burden.
“National Treasury has been after a credible plan to dig themselves out of the situation,” Van den Heever explained. “But it appears that the city of Johannesburg has made every attempt to dig themselves in deeper rather than create an incremental strategy to get themselves into a better position.”
Consequently, Treasury views the allocation of the equitable share to the city in its current state as “money thrown away,” as the funds are unlikely to reach essential services.
Billions in Equitable Share and Utility Debts at Risk
The immediate financial threat to the metro involves its equitable share allocation, which totals just over 8 billion rand and is distributed in three separate tranches. The first tranche, valued at nearly 3 billion rand, is currently at the highest risk of being frozen.
If these funds are withheld, questions arise regarding how National Treasury will reallocate the savings. Van den Heever suggests that the most logical pathway would be for Treasury to appropriate the money to directly offset the city’s massive, mounting liabilities to utility providers such as Rand Water and Eskom. While this would effectively pay for essential bulk services that the city has neglected, it does not inherently force the municipality to change its internal spending behavior.
The broader concern is that even if the full 8 billion rand were paid out, there is no guarantee the funds would improve the lives of residents. Van den Heever warned that without strict ring-fencing, the money could easily be diverted to irregular expenditure, dodgy contractors who fail to deliver, and unnecessary personnel, leaving the vulnerable Johannesburg community to suffer the consequences of a failing city.
The Controversial 10.3 Billion Rand SAMU Agreement
A primary catalyst for Finance Minister Enoch Godongwana and National Treasury’s frustration appears to be the city’s willingness to risk a total funding cut to preserve a highly controversial 10.3 billion rand agreement with the union SAMU.
Van den Heever was highly critical of the deal, describing it as a “straight handout” that offers absolutely zero value for money or additional service delivery for the city. He pointed out that the city incurred this massive liability without having the revenue to back it up, meaning the funds would have to be extracted from other necessary municipal services.
“It’s essentially been an obligation placed on the city with no funds for it,” Van den Heever stated, adding that the arrangement appears highly conflicted and acts as a bonus for politically connected SAMU members rather than a tool for service delivery. “There’s not a thing more that the city’s going to get for this additional money.”
Legal Implications and the Road to Recovery
The SAMU agreement has placed the city in a severe legal bind, with the union threatening to take the municipality to court if the deal is scrapped. However, Van den Heever argues that the city was never legally empowered to enter into such an agreement without the funds to cover it, rendering the allocation unlawful from the start.
He expressed support for the matter being tested in the courts, suggesting that the agreement should be stopped, withdrawn, and thoroughly investigated to understand the exact nature of the deal and the quid pro quo involved.
To restore long-term financial stability, Van den Heever outlined several urgent measures the city must adopt. These include cutting unfunded expenditure, halting the hiring of personnel with no real function, and addressing the exorbitant salaries paid to executives in dysfunctional public entities that are not being held accountable. Furthermore, he emphasized the need to properly allocate contracts to legitimate contractors who can actually deliver on infrastructure and maintenance.
“If some of this starts to impact on the patronage, then we might actually start to see some improvement in service delivery,” Van den Heever concluded, though he remains deeply skeptical about the city’s political will to implement the necessary reforms.