JOHANNESBURG, GAUTENG — The City of Johannesburg funding crisis has reached a critical tipping point following a final notice from National Treasury indicating its intention to withhold crucial municipal funding. As the metro faces mounting debt and an unfunded budget, governance experts warn that without drastic financial interventions, the city’s service delivery could face severe consequences. Finance Minister Enoch Godongwana’s firm stance highlights the growing frustration over the municipality’s financial management, prompting a detailed analysis of the metro’s precarious economic position and the urgent need for a credible recovery strategy.
Missed Deadlines and a Deepening Financial Hole
The municipality recently faced a strict deadline to respond to National Treasury’s concerns regarding its financial management. While the city declined to comment while the process is underway, governance expert Professor Alex van den Heever notes that the municipality is highly unlikely to have met the deadline without implementing drastic changes to its recently passed, unaffordable budget.
According to Van den Heever, the core of the issue lies in the city’s commitment to approximately 10 billion rand in additional expenditure. This includes plans to hire an additional 1,500 to 2,000 personnel without a credible revenue budget to support them, coupled with a massive debt burden that the city is currently unable to pay.
“National Treasury has been after a credible plan to dig themselves out of the situation,” Van den Heever explained. “But it appears that the city of Johannesburg has made every attempt to dig themselves in deeper rather than create an incremental strategy to get themselves into a better position.”
Consequently, Treasury views the allocation of the equitable share to the city as “money thrown away” unless meaningful action is taken to address the dysfunctional financial practices.
Billions in Equitable Share at Risk
The immediate financial threat to the city involves its equitable share allocation, which totals just over 8 billion rand and is distributed in three tranches. The first tranche, valued at nearly 3 billion rand, is currently at the highest risk of being frozen.
If withheld, questions arise regarding what National Treasury will do with the saved funds. Van den Heever suggests that the most reasonable pathway would be for Treasury to appropriate the money to offset the city’s massive liabilities to utility providers such as Rand Water and Eskom. While this would effectively pay for essential services that the city has neglected, it does not inherently change the municipality’s spending behavior.
The broader concern is that even if the full 8 billion rand were paid out, there is no guarantee the funds would reach essential services. Van den Heever warned that without strict ring-fencing, the money could easily be diverted to extra contractors and tenders that fail to deliver, or to unnecessary personnel, leaving the vulnerable Johannesburg community to suffer the consequences of a failing city.
The Controversial 10.3 Billion Rand SAMU Agreement
A primary catalyst for National Treasury’s anger appears to be the city’s willingness to risk a total funding cut to preserve a controversial 10.3 billion rand agreement with SAMU.
Van den Heever was highly critical of the deal, describing it as a “straight handout” that offers absolutely no value for money or additional service delivery for the city. He pointed out that the city incurred this massive liability without having the revenue to back it up, meaning the funds would have to be extracted from other necessary services.
“It’s essentially been an obligation placed on the city with no funds for it,” Van den Heever stated, adding that the arrangement appears highly conflicted and benefits politically connected individuals rather than ratepayers. “There’s not a thing more that the city’s going to get for this additional money.”
Legal Battles and the Path to Stability
The SAMU agreement has placed the city in a severe legal bind. The union has indicated that if the deal is removed from the table, they will take the municipality to court. However, Van den Heever argues that the city was never legally empowered to enter into such an agreement without the funds to cover it, rendering the allocation unlawful.
He expressed support for the matter being tested in the courts, suggesting that the agreement should be stopped, withdrawn, and thoroughly investigated to understand the nature of the deal.
To restore long-term financial stability, Van den Heever outlined several urgent measures the city must adopt. These include cutting unnecessary and unfunded expenditure, halting the hiring of personnel with no real function, and addressing the exorbitant salaries paid to executives in dysfunctional public entities. Furthermore, he emphasized the need to properly allocate contracts to legitimate contractors who can actually deliver on infrastructure and maintenance.
“If some of this starts to impact on the patronage, then we might actually start to see some improvement in service delivery,” Van den Heever concluded, though he remains skeptical about the city’s willingness to implement the necessary reforms.
