Finance minister engages Lekwa Municipality on Financial Recovery Plan
The meeting is part of the National Treasury's ongoing efforts to strengthen financial governance, improve service delivery, and restore the municipality's financial sustainability.
The Minister of Finance, Enoch Godongwana, visited Lekwa Local Municipality on June 12 to discuss the revised Financial Recovery Plan (FRP) with municipal leadership.
The engagement focused on presenting the recovery framework, clarifying its objectives, and defining the roles and responsibilities of all stakeholders involved.
The meeting is part of the National Treasury’s ongoing efforts to strengthen financial governance, improve service delivery, and restore the municipality’s financial sustainability.
The municipality has also been experiencing perennial political and administrative challenges, which have had an adverse impact on governance, financial management and service delivery.
Lekwa is one of the top 10 municipalities nationwide that default on Eskom payments. Its debt to Eskom was approximately R1.3b in November 2020.
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The municipality is unable to service its creditors within 30 days due to inadequate cash flow and is also unable to collect outstanding debts due to the low collection rate and inadequate political will to implement the credit control policy.
The intervention followed the municipality’s placement under a mandatory Financial Recovery Plan after a landmark High Court order.
In May 2018, Astral Operations Limited and other applicants approached the Northern Gauteng High Court seeking national government intervention in the financial and service-delivery affairs of Lekwa Municipality, in terms of Section 139(7) of the Constitution.
The applicants sought relief to restore the municipality’s financial stability and ensure the sustainable delivery of municipal services and infrastructure.
The court ruled in favour of the applicants, and on April 12, 2021, the Pretoria Division of the High Court ordered the national government to intervene in Lekwa Municipality within 14 days.
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The court further directed the national government and the Minister of Finance to initiate and approve a Financial Recovery Plan in accordance with the provisions of the Local Government: Municipal Finance Management Act (MFMA).
The national intervention was approved on May 3, 2021, through a Presidential Minute, with Minister Godongwana delegated authority to oversee its implementation.
It was subsequently agreed that the Minister of Finance would lead the intervention, with the support of the Minister of Cooperative Governance and Traditional Affairs (CoGTA).
As part of the intervention, the Cabinet dissolved the municipal council on May 12, 2021. On May 28, 2021, Government Gazette No. 44634 announced the appointment of Johann Mettler as administrator to oversee the recovery process.
Three-Phase Recovery Plan
To facilitate implementation, the Financial Recovery Plan was structured into three phases:
Phase 1: Rescue
This short-term phase focuses on restoring the municipality’s cash position and financial stability.
Key priorities include achieving a funded budget, monitoring cash flow, implementing cost-containment measures, improving debt collection, ring-fencing conditional grants, and paying creditors on time.
Limited service delivery and governance issues are addressed during this phase, which is expected to last up to one year.
Phase 2: Stabilisation
The stabilisation phase constitutes the core of the recovery programme and is expected to last between 12 and 24 months or longer.
While maintaining a strong focus on financial management, the phase addresses the governance, service delivery, and institutional challenges contributing to the municipality’s financial crisis.
These measures include developing a fit-for-purpose organisational structure, improving infrastructure maintenance, reducing losses in water and electricity networks, updating the property valuation roll, and ensuring accurate customer billing.
Phase 3: Sustainability
The final phase focuses on ensuring that the improvements achieved during the rescue and stabilisation phases are sustainable before the intervention concludes.
It includes measures to secure the municipality’s long-term financial viability through strategic development planning and long-term financing.
Targets have been identified across all phases to guide the recovery process and measure progress.
The implementation methods remain at the discretion of the administrator and intervention team, who are continuously monitored against these targets.
Ongoing oversight and support
Minister Godongwana and National Treasury have maintained direct oversight through regular engagements and on-site visits. Quarterly progress reports are presented to the municipal council to assess implementation and identify areas requiring additional support.
The Financial Recovery Plan seeks to address longstanding challenges, including significant debt owed to creditors such as Eskom, deteriorating infrastructure, and persistent unfunded budgets.
National Treasury has also provided technical assistance aimed at stabilising municipal finances, improving revenue collection through initiatives such as smart meter installations, and addressing infrastructure failures affecting water and electricity services.
The continued intervention reflects the government’s commitment to restoring financial stability, strengthening governance, and ensuring sustainable service delivery for residents of Lekwa Municipality.
