Cape town: National Treasury will begin directly deducting funds from national and provincial departments that owe billions of Rands to struggling municipalities.
According to South African Government News Agency, Finance Minister Enoch Godongwana delivered the department's Budget Vote speech in Parliament, highlighting the financial obligations of provincial and national departments to local municipalities.
The Minister revealed that provincial departments owe municipalities more than R14 billion, while national departments are behind with R8.2 billion in outstanding debt. He pointed out the inconsistency in handling debts, where National Treasury deducts funds directly from municipal allocations when municipalities owe the state, but not vice versa. To address this, National Treasury has decided to directly deduct monies from national and provincial departments to settle debts owed to municipalities.
Municipalities themselves remain under scrutiny. Godongwana stated that Treasury would continue to invoke Section 216(2) of the Constitution to withhold funds from municipalities that fail to adopt funded budgets or violate financial management laws. He emphasized the critical need for accountability and consequence management to restore public confidence in local government.
The Minister also discussed urgent reforms needed in local government, focusing on the local government funding model, metro trading services, infrastructure delivery systems, municipal financial sustainability, and budget and grant reforms.
In terms of water and healthcare infrastructure, Godongwana announced a coordinated and performance-driven approach focused on infrastructure rehabilitation and maintenance. The strategy aims to improve water availability, quality, and financial sustainability. He highlighted the need to address the root causes of water infrastructure issues and improve coordination across funding landscapes.
For healthcare, around R41 billion is allocated over the medium term for health infrastructure programmes, emphasizing investment in infrastructure readiness to support a functional health system. The focus includes investments in key hospitals to address service delivery gaps.
Regarding economic challenges, Godongwana noted that global geopolitical uncertainty and trade tensions are pressuring the South African economy, increasing costs and inflation. To mitigate this, the National Treasury has temporarily reduced the general fuel levy, costing the fiscus approximately R17.2 billion. Despite these challenges, economic projections show resilience with growth expected in Sub-Saharan Africa and South Africa over the medium term.
These projections reflect ongoing recovery efforts and structural constraints affecting domestic economic performance. Godongwana stated that the government is reviewing fiscal and economic assumptions to ensure fiscal policy responds effectively to global and domestic conditions.
