Municipalities at war with Treasury blame Eskom

2015-04-06 12:00

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Municipal leaders have accused government of using municipality money that was meant to be used to deliver services to the poor to instead solve Eskom’s woes.

They are threatening to go to court after National Treasury froze the funds of 56 municipalities for owing R12.6?billion on services.

They also said they wanted President Jacob Zuma to intervene in the dispute.

The freezing of the funds came after Eskom and the Water Board initially threatened to cut the power and water to these municipalities, but were persuaded by a national government official not to.

Treasury this week issued a press release saying it withheld the transfer of the municipalities’ equitable share – money meant to be spent solely on municipal services to the poor, such as water, electricity and refuse removal – with effect from March 20.

These municipalities “failed to honour their financial commitments in general and failed to pay Eskom and other service-delivery creditors”, Treasury said.

By the end of last year, municipalities owed Eskom R9?billion, of which R4.5?billion was current and the rest was arrears. They owed the Water Board R3.6?billion, of which R1.3?billion was current.

The SA Local Government Association (Salga) told City Press it was illegal to withhold their equitable share money, because this turned it into a “conditional grant rather than an entitlement, as the Constitution and legislation provide for”.

Salga communications manager Karen Reyneke said Salga had written to Finance Minister Nhlanhla Nene on March 9, asking that the freezing of funds be held in abeyance until Salga and the minister had met about the issue, but that meeting hadn’t happened yet.

Salga’s national executive committee met on Thursday and resolved to request an urgent meeting with Nene and Cooperative Governance Minister Pravin Gordhan.

At this meeting, Salga hopes the matter will be resolved “within constitutional parameters” and municipalities would then be able to “fulfil [their] constitutional obligations to deliver services to the people, rather than direct our limited resources at fixing Eskom’s woes or any other particular debt, for that matter”.

Salga said Eskom’s problems should not be solved “in a knee-jerk manner” and to the detriment of the financial health of municipalities, which were supposed to serve the poorest of the poor.

“In our view, local government and these poorest municipalities are being victimised as an easy target to raise quick money to stave off the immediate cash requirements to keep Eskom a going concern,” Salga said.

Eskom has a revenue shortfall of R225?billion over the next three years.

Salga said it would also write to Deputy President Cyril Ramaphosa to ask that Salga become part of the “war room” set up to address Eskom’s problems.

Treasury, however, said in its statement that section 216 (2) of the Constitution permitted it to stop the transfer of funds “to any organ of state that commits persistent and material breach of its financial obligations”.

It said failure by municipalities to pay Eskom and the Water Board within 30 days amounted to financial mismanagement.

Municipalities were informed early last month that they should enter into repayment arrangements with their creditors, prepare a financial recovery plan where relevant and obtain a council resolution to confirm the municipalities’ commitment to the process.

It said the persistent arrears “negatively impacted Eskom’s cash flow, thereby compromising the utility’s operations and financial position”.

Treasury said better revenue management would reduce debt owed to municipalities and improve service delivery.

An official from cooperative governance, who did not want to be named, said the municipalities in question only lost out on a third of their equitable share, because this was paid in three tranches.

He said the department begged Eskom not to cut electricity to the municipalities.

“I said we must first have a discussion, you can’t just cut,” he said. “We have already done the legal opinion with Treasury about that a long time ago; there is no issue of constitutionality.”

He said there had been meetings before about the servicing of debts of these municipalities, and the freezing of funds was Treasury’s final resort.

Another government official said the municipal leaders had been arrogant. “They see local government as a way of making money,” he said.

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