BHISHO, EASTERN CAPE — The National Treasury has temporarily suspended equitable share funding transfers to six municipalities in the Eastern Cape, citing severe concerns over financial mismanagement and poor governance. The funding freeze places immense pressure on local operations and basic service delivery, directly affecting key metropolitan areas including the Nelson Mandela Bay and Buffalo City Metros.
The equitable share comprises millions of rands intended for the daily operations of municipalities and the provision of basic services to residents. The withdrawal of these funds has raised urgent concerns about the potential collapse of service delivery and the ability of the affected municipalities to pay their staff salaries.
The Eastern Cape MEC for Co-operative Governance and Traditional Affairs acknowledged the severity of the situation, confirming that the National Treasury’s findings are entirely legitimate. The MEC stated that the municipalities bear full responsibility for the financial missteps and emphasized that the provincial government cannot blame the national body for the intervention.
According to the provincial leadership, the financial distress is driven by several critical factors, including consistently unfunded budgets and massive debt, with some municipalities owing Eskom sums close to a billion rand. Furthermore, the province is grappling with high levels of irregular and wasteful expenditure.
A major point of contention is the prevalence of “evergreen contracts”—long-term service provider agreements that bypass standard procurement regulations. The MEC highlighted that Buffalo City and Nelson Mandela Bay are responsible for the largest share of irregular expenditure in the province due to these contracts. In response, the provincial government, alongside the Provincial Auditor-General and the Provincial Treasury, has stepped in to halt these agreements. The goal is to enforce constitutional, open tender systems and ensure legal procurement processes.
To mitigate the ripple effects on residents, the provincial government is actively engaging with the Minister of Finance. The MEC described a recent, highly difficult meeting where the province had to justify why the National Treasury should continue financing municipalities that are failing to comply with financial laws and regulations.
The provincial government has committed to stamping its authority on the matter, working directly within the municipalities to clear irregular expenditures and ensure their budgets are properly funded. Good governance, the MEC noted, is not optional but a mandatory expectation for every sphere of government.
While the engagements with the Minister of Finance have been frank, no formal agreement to release the funds has been reached yet. The Minister has made it clear that funding will only be released once the province presents clear, actionable plans, rather than improvised or “thumbsucked” strategies.
A follow-up meeting with the Minister of Finance, which will include the affected municipalities, is scheduled to take place within the next seven days. The provincial government remains optimistic but acknowledges that it must first resolve its in-house governance issues to properly convince the National Treasury to restore the vital funding.
