VIDEO: If grant funds are revoked, Tshwane might fail to pay contracted service providers

The Tshwane metro has heeded the deadline given by National Treasury to motivate why grant funds should not be forfeited and paid into its coffers.

It has rationalised in a response to National Treasury to take account of several factors that led to the metro not using the much-needed funds, which place projects for roads, reservoirs, substations upgrades and developing neighbourhoods at budgetary risk.

Tshwane can lose R629.6-million due to non-expenditure, which could place it in the pitfall of being unable to pay contracted service providers by the end of March, if theNational Treasury withholds transferring the tranches expected soon by Tshwane’s finance team.

Tshwane last year approved a total budget of R46.9-billion, consisting of an operating budget of R44.5-billion and a capital infrastructure investment budget of R2.4-billion.

Spokesperson Selby Bokana said the metro wrote a letter to National Treasury in which it elaborated in detail why the funds were needed by communities and how it intended to spend the various allocated funding before the end of the current financial year.

Bokaba said in the response the metro outlined to Treasury that it had developed a recovery plan to ensure accelerated expenditure of the grant funds and explained what had contributed to unsatisfactory performance as of December 31, 2023.

According to Tshwane, the factors for the underperformance in grants were:

– A migration from an old financial management system to the new system, which impacted processing and accounting for expenditure.

– The reduction of the Urban Settlements Upgrading Development Grant (USDG) and Informal Settlements Upgrading Partnership Grant (ISUPG) during the second quarter as directed by National Treasury, which necessitated early review and repackaging of several programmes to accommodate the cuts.

– Prolonged unprotected labour strikes which impacted heavily on the implementation and monitoring of projects.

– Delays in the initial stages of procurement (approval of specifications and tender advertising approvals).

– Delays in the appointment of the contractors to provide electrical cables and spares, as well as lead times in the supply and delivery of materials for electricity projects.

Bokaba said these factors however were overcome and the plan was to enhance performance on all the grants within the set timeframes.

“The city has shown tremendous progress in most projects by issuing appointment letters and concluding contracts with the appointed service providers. The city has also reprioritised grand-funded projects as part of the 2023/24 budget adjustment process,” he said.

“Crucially, the city has already depleted the transferred tranches when current expenditure and commitments for February are considered. From the beginning of March, the city will face serious funding shortfalls when it comes to paying contracted service providers.

“Therefore, to mitigate this challenge, the final tranches must be transferred by the end of March, as per the approved payment schedule.”

Bokaba said the total spending, including commitments, was R1.2-billion of the R1.5-billion which had been transferred.

By January, 84% of transferred funds had been spent.

“The unspent balance for the five identified grants was R232-million. As demonstrated in the recovery plans, spending is expected to reach 100% by the end of the financial year.”

Bokaba said the metro’s case was compelling and he was optimistic the funds would be obtained despite the recent antics by Treasury to municipalities.

National Treasury has threatened to withhold R629-million of grants meant to develop the cash-strapped Tshwane.

The grants intended for forfeiture are :

– R14.4-million from the preparation allocation of R62-million
– R391.4-million from the urban settlement of R978.5-million
– R85-million from the public transport allocation of R830.3-million
– R102.8-million from the settlements upgrading allocation of R619.8 million, and
– R36-million from the neighbourhood development allocation of R155.4-million

Deputy director-general for intergovernmental relations at the Treasury, Malijeng Ngqaleni demanded to know why expenditure as of December 31 was below 40%.

She also demanded a commitment that the allocated funds would be fully spent by June 30, meaning the municipality would not ask for funding to roll over, post motivation on why they required the funds.

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