Municipalities that underspent grants to them for infrastructure risked having them reallocated to better-performing municipalities, the National Council of Provinces' select committee on finance heard on Monday.
Provincial and local government department officials briefed the committee on progress made with capacity to spend municipal infrastructure grants aimed at assisting municipalities financially in providing basic services. The grant covers the capital cost of providing basic infrastructure for the poor.
Since the introduction of the grant in April 2004, R26bn has been allocated to infrastructure projects related mainly to the provision of water services, sanitation and roads. By September last year, the programme had benefited 3,2-million households, the department said.
The continued underspending has taken place despite the launch of Project Consolidate by Provincial and Local Government Minister Sydney Mufamadi.
This was an emergency plan to boost the almost two-thirds of the country's municipalities that were in financial crisis with administrative and technical expertise to collect their revenue more efficiently and improve their service delivery.
The department's senior manager, Phanuel Bologo, said most municipalities were still under performing on expenditure of the grant despite national government's interventions to assist them.
Due to this "persistent underspending", the department had requested the national treasury to stop and reallocate funds to municipalities.
This process would be finalised this month. Altogether, 106 municipalities were identified for reallocation of funds, including 31 in KwaZuluNatal, 20 in Eastern Cape and 12 each in Limpopo and Mpumalanga.
However, the reallocated funds would be ring-fenced for water and sanitation projects, particularly in municipalities with the highest backlogs in getting rid of the bucket sanitation system.
The total allocation for the grant in this fiscal year amounted to R6,3 billion, of which R3,6 billion was transferred to municipalities by end-December. Of this amount, municipalities had spent only R2,9 billion.
"Expenditure represents 47,2% of the total allocation and 84% of the transferred amount," Bologo noted.
The provinces with the largest unspent municipal funds were Eastern Cape with R144 million, Gauteng with R117 million and Mpumalanga with R80 million. In other cases, municipalities were experiencing financial difficulties due to overspending.
Grant funds were withheld for the first time in November 2005 because of underspending, but by the end of the fiscal year all grant funds had been transferred to municipalities.
The office of the auditor-general raised concern over the transfer of funds when expenditure was not satisfactory and said the department should have requested the treasury to stop the funds so they could be reallocated.
Another challenge was lack of capacity at municipal level to implement infrastructure projects.
Mufamadi is scheduled to address the Johannesburg Press Club on Thursday on the successes and failures of Project Consolidate, and will release case studies on some municipalities that served as pilot projects for targeted service delivery programmes.
