Finance

Provincial government continuously monitors all municipalities in the province, in line with our oversight responsibilities in Chapter 7 of the Constitution. Provincial Treasury assesses the monthly financial data submitted by municipalities for indicators of municipalities that are at risk of a possible financial crisis. Theewaterskloof Municipality (“the Municipality”) was identified as needing closer monitoring through this process. It was particularly concerning that the Municipality went from a sound financial position in 2022/23, to signs of trouble emerging by early 2023, before deteriorating into a financial crisis. In addition, based on the in-year monitoring financial performance assessment for March 2023, vulnerabilities in the Municipality were identified.
Provincial Treasury engaged Theewaterskloof Municipality to provide advice to enable the municipality to avoid a further deterioration of their financial situation. This included (but was not limited to):
•
On 16 May 2023, the Provincial Minister of Finance and Economic Opportunities sent a letter to the Mayor of the Municipality, highlighting concerns of the risk of a deteriorating financial position over the 2023/24 MTREF period that could result in an unfunded position.
•
Serious challenges experienced in the Municipalities Supply Chain Management (“SCM”) department resulted in delayed procurement and disruption in the implementation of the capital programme. Provincial Treasury therefore provided training to the Municipality’s bid committees and SCM practitioners to ensure that they are adequately capacitated to undertake their functions.
•
On 6 March 2024, Provincial Treasury presented to the Council’s budget workshop. The developing financial crisis facing the Municipality was set out clearly and the role of the Council in the oversight of the budget was explained. Council was also made aware of the Municipality’s funding status and the need for a credible budget funding plan.
Unfortunately, the municipality did not take sufficient actions in response to the advice to avoid the further deterioration of the financial position of the Municipality. Provincial Treasury engaged the Municipality on its 2024/25 budget, however the Municipality failed to make sufficient changes to achieve a funded budget. Provincial Treasury then supported the Municipality to develop a Budget Funding Plan to address the unfunded budget adopted by the Municipal Council. Provincial Treasury identified from the Municipality’s monthly financial data that they appeared to have breached the criteria in section 140 of the Municipal Financial Management Act (Act 56 of 2003, “the MFMA”) requiring that the province must impose a mandatory intervention.
In line with the requirements of section 136 of the MFMA, the Provincial Minister of Local Government, Environmental Affairs and Development Planning wrote to the Municipality on 16 September 2024 to consult, determine the facts and, where appropriate, obtain further information that may refute, clarify, or correct the assessment and findings that the Department of Local Government and Provincial Treasury have made. The Municipality replied on 30 September and provided supplementary information on 4 October.
Provincial Treasury and the Department of Local Government assessed the response, as well as the most recent financial information available. Based on this assessment, a Memorandum was prepared for Cabinet recommending that the Municipality met the criteria requiring a mandatory intervention. The Cabinet Memorandum was vetted by State Law Advisors within the Department of the Premier Legal Services unit before being submitted for consideration by Provincial Cabinet.
On 6 November 2024, the Provincial Cabinet resolved to intervene in the Theewaterskloof Local Municipality in terms of section 139(5) of the Constitution of the Republic of South Africa, 1996, (the “Constitution”), read with the Local Government: Municipal Finance Management Act, 56 of 2003, (“the MFMA”) by imposing a recovery plan aimed at securing the Municipality’s ability to meet its financial commitments.
Formal notification of the intervention was sent to the Municipality, the national Ministers of Cooperative Governance and Traditional Affairs, the Chairperson of the National Council of Provinces, and the Speaker of the Western Cape Provincial Parliament on 11 November 2024. On the same day, National Treasury’s Municipal Financial Recovery Service was requested to prepare a Financial Recovery Plan.