The Director General of National Treasury Dr Duncan Pieterse says the decision to temporarily withhold R13.5 billion equitable share transfer to 69 municipalities has been applied as a last resort.
Pieterse says this a temporary move aimed at instilling fiscal discipline.
National Treasury, led by Finance Minister Finance Minister Enoch Godongwana, briefed the Portfolio Committee on Cooperative Governance on its decision to withhold the money.
Pieterse says: “And so the section 216 intervention to the minister’s point is a last resort that we used in cases where the other oversight and intervention responsibilities have failed to yield the intended results. In December last year, the National Treasury embarked on an extensive process of consultations with the affected municipalities that were in breach of the obligations in terms of the Municipal Finance Management Act and we gave them notices in September and in December last year that equitable shares could be withheld or stopped if they fail to take action to address them.”
Dr Pieterse says initially, there were 99 municipalities out of the 267 in the country whose funding was supposed to be withheld.
He however says the figure decreased to 69 because some of them complied with their revenue requirements.
He adds that that the decision was done as a corrective and not as a punitive measure.
“We confirm here that this action is a corrective measure by the Minister of Finance to halt financial declaration in municipalities and these are the municipalities that have consistently failed to comply with their obligations, and we will scratch that out later, despite the very expensive consultation we have undertaken and the notice that have been given in writing. The Minister of Finance has various tools provided for by the Constitution and the Municipal Financial Management Act which permit the minister to cut off funding temporarily to municipalities until they can prove that they are able to functions in accordance with their obligation.”
Godongwana told the meeting that National Treasury is, by law, entitled to withhold equitable share transfer to municipalities.
“Our view is that we are entitled to go up to 120 days for as long as Parliament has not said no stop. That’s why we write to Parliament and inform Parliament of our intentions for Parliament to convene and to decide on whether or not we can proceed and under what conditions we can do so.”
Management of public funds under scrutiny – Zolile Williams:
Facts Only
* The decision to temporarily withhold R13.5 billion in equitable share transfer to 69 municipalities was made.
* The action was described as a last resort to instill fiscal discipline.
* The decision was briefed to the Portfolio Committee on Cooperative Governance by National Treasury.
* Dr. Pieterse stated the intervention is a last resort used when other oversight failed.
* National Treasury consulted with municipalities regarding breaches of obligations under the Municipal Finance Management Act, issuing notices in September and December of the previous year allowing for withholding of shares.
* Initially, 99 out of 267 municipalities were targeted for funding withholding.
* The number decreased to 69 because some municipalities complied with revenue requirements.
* The action was intended as a corrective measure to halt financial declarations in municipalities that consistently failed to comply.
* The Minister of Finance has tools under the Constitution and the Municipal Financial Management Act to temporarily withhold funding.
* National Treasury is legally entitled to withhold equitable share transfer.
* There is a provision for withholding funds up to 120 days pending a decision from Parliament.
Executive Summary
The Director General of National Treasury, Dr Duncan Pieterse, stated that the decision to temporarily withhold R13.5 billion in equitable share transfers to 69 municipalities was a last resort intended to instill fiscal discipline. This action was communicated to the Portfolio Committee on Cooperative Governance by the National Treasury, led by Finance Minister Enoch Godongwana.
Dr. Pieterse clarified that the intervention was a measure used when other oversight and intervention responsibilities failed. The Treasury had consulted with affected municipalities regarding breaches of obligations under the Municipal Finance Management Act, issuing notices in September and December of the previous year allowing for the withholding or stopping of equitable shares if actions were not taken.
Initially, 99 out of 267 municipalities were slated for funding withholding; the number was reduced to 69 because some municipalities complied with their revenue requirements. The action was framed as a corrective measure by the Minister of Finance to halt financial declarations in those who consistently failed to comply, with the intention of rectifying the situation later.
Finance Minister Godongwana affirmed that National Treasury is legally entitled to withhold equitable share transfer. He further indicated that the Treasury has the authority under the Constitution and the Municipal Financial Management Act to temporarily cut off funding until municipalities demonstrate compliance. The Treasury also indicated a willingness to engage Parliament to seek a stop order for up to 120 days.
Full Take
The narrative employs a strategic framing where fiscal necessity is presented as the justification for imposing significant administrative action, positioning the Treasury's intervention not as punishment but as necessary corrective accountability. The distinction between the initial large set of non-compliant municipalities (99) and the final group (69) serves to manage public perception by emphasizing that some compliance was achieved through prior consultation, mitigating the appearance of arbitrary enforcement. This move from potential punitive action to a corrective measure—focusing on halting financial declarations rather than outright punishment—is a deliberate attempt to establish legitimacy for the withholding of funds.
The underlying tension lies between the principle of local fiscal autonomy and the centralized mandate for national financial discipline enforced through legal instruments like the Municipal Finance Management Act. The reference to using a "last resort" suggests an acknowledgement of established, less severe mechanisms that were not fully effective, which is a form of self-justification.
The discussion regarding the 120-day window and engagement with Parliament reveals the dynamic between executive authority (National Treasury) and legislative oversight (Parliament), suggesting that the ultimate legitimacy of the withholding rests on this constitutional negotiation rather than unilateral decree. The analysis must consider whether this focus on corrective action successfully balances the need for financial accountability against potential friction with municipal governance structures.
What measures are in place to ensure that future compliance is driven by sustainable capacity building rather than simply reactive adherence to imposed timelines? How does the emphasis on 'corrective' action influence the long-term relationship between national financial authorities and local governments when disputes arise? What historical precedent exists for this specific application of intervention powers?
Sentinel — Human
This text appears to be a report on a specific governmental decision, characterized by direct quotations and focused administrative details, suggesting human journalistic reporting.