Godongwana to cut provincial funds over R15 billion municipal debt

Finance Minister Enoch Godongwana has had enough. He's now using the Constitution to force provinces to pay the R15 billion they owe municipalities for water, electricity, and other services.

Godongwana wrote to Parliament this week, saying the National Treasury plans to invoke Section 216(2) of the Constitution. This section allows Treasury to withhold provincial Equitable Share transfers — the money provinces get from national government to run schools, hospitals, and other services.

The letter was published in the parliamentary communique on Thursday. It's been sent to the Select Committee on Finance for consideration. Provinces now have a chance to pay up or lose their allocations.

Godongwana said there has been "persistent and material non-compliance by provincial departments in settling municipal property rates and service charges, including charges relating to water, electricity, sanitation, and other related municipal services owed to municipalities."

DA MP Dennis Ryder, who sits on the select committee, welcomed the move. He said the DA has argued for years that accountability in public finance can't be selective.

"Government departments can't expect residents and businesses to pay their municipal accounts while the state itself accumulates billions in unpaid debt," Ryder said.

He noted that over R8.5 billion of the R15 billion has been outstanding for more than a year. Provincial departments are among the biggest debtors of struggling municipalities. Recovering that money could help fix roads, keep water flowing, and keep the lights on.

"Consequence enforcement must mean more than strongly-worded letters. Provinces that fail to meet their legal obligations must face real consequences," Ryder said.

Last month, Godongwana told Parliament that municipalities had accused him of bias. They said he deducts money from municipal allocations when they owe organs of state, but doesn't do the same to national and provincial departments that owe municipalities.

Godongwana said Treasury has now quantified the total debt. Provincial governments owe about R14 billion, and national government owes R8.2 billion. That adds up to R22 billion owed to municipalities.

"We intend to make sure that money is transferred back to municipalities," he said when he tabled the budget vote in the National Assembly.

Treasury Director-General Duncan Pieterse had already written to departments warning that if they didn't pay, Treasury would make deductions from their allocations.

This week, it also emerged that debt owed by struggling municipalities to water boards has ballooned by almost R4 billion, reaching R28 billion over the past 10 months.

Water and Sanitation Minister Pemmy Majodina said municipalities blame the non-payment on consumers, including government departments, for not servicing their debts.

Majodina's department has been asking Treasury to withhold Equitable Share allocations from defaulting municipalities as a last resort. But she said municipalities often pay only after entering payment agreements, then stop paying two months later. The department then has to go back to Treasury again.

"We have already made a submission regarding close to 16 municipalities that are just not paying the water boards," Majodina said on Wednesday.

She urged municipalities to apply the same approach her department uses — withholding funds until debts are settled.