Malusi Gigaba warns on councils’ underspent budgets

Finance Minister Malusi Gigaba painted a bleak picture of under-spending by municipalities, which he said last week stood at R53.1bn in June 2017.

This means funds allocated for infrastructure and other projects are not spent, causing a ripple effect of maintenance-related problems.

Underspending worsened 20.8% from R42.7bn for the corresponding period in the previous year. This is compounded by the fact that municipalities are struggling to pay Eskom and water boards for supplying power and water.

Along with a letter to National Assembly Speaker Baleka Mbete on the extent of underspending, Gigaba provided a complete report on over-and underspending of municipalities as at July 30 2017.

Underspending could be attributed to liquidity challenges emanating from the adoption of unrealistic budgets, poor expenditure management and delays in paying creditors, the minister said. "It should be noted that the underspending of budgets does not translate into an equivalent amount of cash in the bank of the affected municipalities."

Gigaba said the risk of a cash flow crisis was imminent and affected municipalities that incurred operational expenditure exceeding revenue collected. He said 26 municipalities underspent their budgets between 5% and 10%, 37 under-spent by between 10% and 15% and 156 municipalities under-spent by more than 15% of their adjusted budgets.

"Twenty-five municipalities performed within a 5% margin against their adjusted budget compared with the 29 municipalities in the previous year’s corresponding period."

Amos Masondo, co-operative governance and traditional affairs portfolio committee member for the ANC, said spending imbalances in municipalities were not new.

"Some of these matters have been discussed over the years and this meeting is not helping us make any progress. We need ministers to come forward as well to tell us where they are on resolving these matters."

DA committee member Kevin Mileham said council debt made it difficult to focus on the core function of delivering services and that creditors would have to consider write-offs.

magubanek@businesslive.co.za