- In March 2020, the National Treasury stopped grants to 47 municipalities.
- Provinces or municipalities that do not spend their allocated grants from national government or comply with grant conditions, could find fund transfers withheld or relocated to another recipient.
- Metros around the country had urban settlements development grants reduced significantly last year.
Municipalities could face further financial pressure after National Treasury warned of changes in conditional grants.
The latest Budget Review, issued following Finance Minister Tito Mboweni's Budget speech, notes that provinces or municipalities not spending their allocated grants from national government - or not complying with grant conditions - could find the fund transfers withheld or allocated elsewhere.
Treasury said the aim was to improve coordination between national, provincial and local government, and to strengthen accountability and service delivery.
Carrot and stick
Speaking during a press briefing after the Budget, National Treasury deputy director general for intergovernmental relations, Malijeng Ngqaleni, said: "Where we can intervene in terms of stopping conditional grants to non-performing or underperforming municipalities, we make progress by reallocating those resources to municipalities that are making progress in terms of service delivery.
"It is a carrot-and-stick approach to improving standards at a local government level."
In the 2019/20 year, Treasury withheld six conditional grants from four provinces, pending the resolution of outstanding problems, and stopped one conditional grant, which was then reallocated to another province.
In March 2020, the Treasury stopped grants to 47 municipalities for the same reasons.
According to Mboweni, funds are being reallocated to municipalities that have fast-tracked projects and shown that they are spending their allocations.
In February 2020, Treasury placed Nelson Mandela Bay Municipality under intervention due to persistent non-compliance and mismanagement of funds, and transfers have been suspended.
"The National Treasury will stop all transfers to the municipality until its finances have been stabilised.
"The provincial treasury and department of cooperative governance are managing this intervention," reads the Budget Review.
Upgrade for informal settlements
Meanwhile, for the 2021/22, a standalone informal settlement upgrading grant for provinces and municipalities will be introduced, drawn from funds previously within the human settlements development grant and the urban settlements development grant for provinces and municipalities.
The Review stressed that these grants "remain crucial components for municipalities to deliver basic services such as housing and the upgrading of informal settlements".
Metros around the country had urban settlements development grants reduced significantly last year. Mangaung had a 37% reduction, while the City of Ekurhuleni received a 6% cut and the City of Tshwane, 20%.