Yesterday, National Treasury informed me that the transfer of funds to the ANC-led Nala Municipality in the Free State has been stopped following four years of financial mismanagement as identified by the Auditor-General (AG). This is the first time such an intervention has taken place.
Section 216(2) of the Constitution dictates that National Treasury "may stop the transfer of funds to an organ of state if that organ of state commits a serious or persistent material breach of those measures".
The AG had identified serious problems in Nala municipality way back in 2008. These included maladministration, flouting of procurement processes, corruption and fraud. The municipality also failed to submit audit reports and financial statements for 2009/10 and 2010/11, or to complete performance management reports as required by the Municipal Finance Management Act (MFMA). None of the AG's recommendations were implemented, and no one was ever held accountable.
The intervention by National Treasury is the first of its kind and sets a welcome precedent. The DA is satisfied that the Minister of Finance, Pravin Gordhan, has taken a bold step by approving the intervention, which sends a clear message to public entities that corruption and non-compliance will not be tolerated.
Whilst the intervention is welcomed, the implementation and the corrective measures put in place to rehabilitate the municipality need to be closely monitored.
In this regard, the DA will be asking Minister Gordhan to commission the drafting of a report, to be presented to the Standing Committee on Finance, that explains the following:
As the custodian of state funds, how does National Treasury intend to ameliorate Nala Municipality's financial management practices?
What mechanisms has National Treasury instituted to ensure that Nala Municipality's future expenditure is aligned with state priorities?
What timescale does National Treasury envisage with regards to the resumption of financial transfers to the municipality?
The Minister must be commended for taking decisive action in this case and setting a promising precedent. The next step is to ensure that Nala municipality is rehabilitated effectively and efficiently to ensure that the people of Nala finally get the services they deserve from government.
David Ross, Shadow Deputy Minister of Finance