South Africa: Failure to Spend Budgets to Come Under the Spotlight

24 February 2021

From 2021, expenditure failure accountability is expected to take centre stage as the National Treasury is set to review provincial infrastructure sector funding policies.

In its 2021 Budget Review, the National Treasury said this would be accompanied by proposals of how grants, incentives and other funding can best be structured to coordinate planning and budgeting.

Treasury said this would be in line with the Cabinet-approved District Development Model, which was intended to improve coordination between national, provincial and local government, including state entities to strengthen accountability and service delivery.

Introduced in 2019, the model focuses on 52 district and metropolitan spaces as convergence points for public and private sector investment, supported by joint planning, budgeting and implementation processes.

"If a province or municipality is not spending its allocated funds or does not comply with grant conditions, then further transfers can be withheld or reallocated to another recipient," said the department.

In the 2019/20 financial year, the National Treasury withheld six conditional grants from four provinces, pending the resolution of outstanding problems, and stopped one conditional grant from one province, which was then reallocated to another province.

In March 2020, the National Treasury stopped grants to 47 municipalities for the same reasons.

These funds are being reallocated to municipalities that have fast-tracked projects and shown an ability to spend their allocations.

In February 2020, the National Treasury said it placed Nelson Mandela Bay Municipality under intervention, as authorised by the Constitution, due to persistent non-compliance and mismanagement of funds.

"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.

"Proposed changes to the structure of conditional grants are designed to align them with evolving policy objectives," the document reads.

From 2021/22, a standalone informal settlement upgrading grant for provinces and municipalities will be introduced.

This grant is made up of components previously within the human settlements development grant and the urban settlements development grant for provinces and municipalities.

Treasury said lessons learnt from the components will inform the implementation of the standalone grants.

"The title deeds restoration grant was introduced for a specific period to eradicate the backlogs in the title deeds registrations for projects completed before 31 March 2014," reads the Budget Review.

In 2021/22, this grant is expected to be reincorporated into the human settlements development grant.

The COVID-19 component within the HIV, tuberculosis, malaria and community outreach grant will continue in 2021/22.

Treasury said other changes aim to improve the effectiveness of conditional grant spending.

"The 2021 Division of Revenue Bill will enhance responsiveness by allowing for disaster grant funding to flow more rapidly following a disaster declaration," it adds.

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