Suliman Rajah writes*:

The recent decision by the National Treasury to withhold the equitable share allocation from the JB Marks Municipality deserves closer scrutiny than the standard “non-compliance” narrative typically presented in the media.

While the municipality cannot escape accountability for its documented financial failures – including R4.1 billion in irregular expenditure and over R1 billion in arrears to Eskom – the Treasury’s actions raise troubling questions about their true motivations.

 The Legal Framework for UIFWE Already Exists

Section 32 of the MFMA provides a comprehensive framework for dealing with unauthorised, irregular, fruitless, and wasteful expenditure (UIFWE). The legislation establishes clear procedures that must be followed. The accounting officer must promptly inform the mayor, the MEC, and the Auditor-General of any UIFWE. The municipal public accounts committee must investigate recoverability. Disciplinary proceedings must be instituted against responsible officials, and criminal cases opened where fraud or corruption is suspected. The municipality must recover UIFWE from the person liable, unless certified irrecoverable and written off by council.

MFMA Circular 111 further outlines detailed support and monitoring roles for National Treasury, including engaging with municipalities, conducting training, and monitoring the implementation of UIFWE reduction strategies.

If these procedures are already in place, why does the Treasury need to withhold funds meant for indigent communities?

 The Privatisation Agenda: RT29 and the 25-Year PPA

The answer may lie in two interconnected developments that suggest the Treasury is using the withholding of funds as leverage to force municipalities into private contracts.

First, the National Treasury awarded the RT29-2024 transversal contract for smart electricity and water meters to a panel of private service providers including Conlog, MTN, and Vodacom. This is a government-wide contract allowing municipalities to procure smart metering solutions—including end-to-end billing, smart load management, and prepaid meter conversion—without going through their own competitive bidding processes. Conlog’s CEO described this as a “turning point” because it “alters the procurement practice, making the process quicker, efficient, and effective.” Municipalities can simply “apply” to participate and then select a provider from the approved list.

Second, according to reports, the JB Marks Municipality is pursuing a 25-year Power Purchase Agreement (PPA) with a private electricity generation company for a 130 MW Solar PV plant and 30 MWh battery storage system—a contract estimated at between R2.8 billion and R3.7 billion in capital expenditure. The proposed PPA has been advertised for public comment without having been tabled before the municipal council. This sequence is explicitly contrary to Section 33(1)(a) of the MFMA, which requires a council resolution before public consultation. Furthermore, Chapter 11 of the MFMA requires a full Public-Private Partnership process—including a feasibility study and National Treasury approval—for any 25-year private agreement.

As Councillor Hans-Jurie Moolman (DA) has noted, councillors have “no idea what the contents of this contract entail,” and there are concerns about whether the bidding process was competitive and whether the supplier holds the necessary NERSA licence.

 The Inconsistency: Treasury as Both Enforcer and Facilitator

This is where the Treasury’s position becomes incoherent. The Treasury publicly withholds equitable share from non-compliant municipalities to enforce fiscal discipline, claiming to be acting as a “last resort” enforcer. But privately, the Treasury has created RT29-2024 to allow municipalities to procure smart meters from a pre-approved private panel, and is facilitating municipalities into long-term private contracts like the 25-year PPA without proper PPP processes.

The Treasury points to the Auditor-General’s findings of R151 billion in UIFWE, but the same municipalities are being pushed into contracts that may further entrench private profit at public expense.

The Treasury cannot claim it was unaware of the non-compliance—municipalities submit Section 71 and 72 reports monthly. It does not take years to act against a municipality for these breaches. The Treasury was aware of the pattern from the first month.

 The Constitutional Dimension: Punishing the Poor

The equitable share is an unconditional grant drawn from national taxes and allocated to municipalities to fund basic services such as water, sanitation, and refuse removal. By withholding these funds, the Treasury is effectively punishing poor communities—especially poor Black unemployed and shack dwellers—for the shortcomings of neoliberal policies and corruption.

The South African Local Government Association (SALGA) has previously warned that withholding funds “will disproportionately punish the poor and negatively affect service delivery to those communities.” As Newcastle Municipality’s municipal manager argued, Treasury is using the equitable share “as a weapon and a threat to punish the municipality.”

 Conclusion: A Pattern of Coercion

The evidence suggests a pattern: the Treasury creates a crisis by withholding essential funds, which forces municipalities to seek “solutions” in the form of private contracts—whether for smart meters under RT29 or for electricity under a 25-year PPA. The poor are told that “compliance” is the issue, while the real agenda is the privatisation of public services.

This matter should be raised with the South African Human Rights Commission (SAHRC). No piece of legislation should be found to go against the Constitution, especially those sections that procure the principle of fairness and redress. The National Treasury is acting as both judge and jury while simultaneously being the architect of a system that may be part of the problem.

We need to demand answers – including the Chapter 11 feasibility study required for any PPP, and the council resolution required by Section 33(1)(a) of the MFMA. We need to ask whether the Treasury’s withholding of funds is rationally connected to the purpose of improving governance, or whether it is designed to force municipalities into private contracts that the public has not properly vetted.

The poor are innocent in this matter. They deserve better than to be used as pawns in a strategy to privatise public services.

* The views and opinions expressed in this letter are those of the author and do not necessarily reflect the views or editorial position of the publication.