South Africa’s National Treasury has withheld funds from what is called the local government equitable share that was due to be paid to Johannesburg.

This is money that national government transfers to municipalities every year so they can provide basic services. It is the main unconditional grant municipalities receive from the national budget and helps fund services such as water, sanitation, refuse removal, electricity, municipal administration, and free basic services for poorer households. It is called equitable because the Constitution requires nationally raised revenue to be shared fairly between national, provincial, and local government.

Treasury says the July transfer is being withheld from selected municipalities, of which Johannesburg is the most significant, to enforce fiscal discipline; improve the management of public money; deal with unauthorised, irregular, fruitless, and wasteful expenditure; and ensure that municipal officials and office bearers are held accountable where required by law.

Johannesburg is only one of a large number of municipalities named. Other municipalities in Gauteng that are having their equitable share withheld are Emfuleni, Lesedi, Sedibeng, Merafong City, and Rand West City. Three other metros are also having their equitable share withheld – Mangaung in the Free State, and Nelson Mandela Bay and Buffalo City in the Eastern Cape.

Legally, Treasury says it is acting under section 216(2) of the Constitution, read with section 38 of the Municipal Finance Management Act. It describes the move as corrective rather than punitive, and says it does not expect service delivery to be affected because the withholding is over a short term. Transfers will resume once affected municipalities meet the required conditions and submit proof that they have done so.

But in Johannesburg, the decision also lands in the middle of an African National Congress (ANC) power struggle. The Common Sense previously reported that the threat to cut Johannesburg’s funding could be read as part of a broader move by the national ANC to discipline the Gauteng and Johannesburg ANC leaderships, who are seen to be driving a campaign to have Paul Mashatile installed as ANC leader at odds with the wishes of the Ramaphosa administration.

Finance Minister Enoch Godongwana had already warned Johannesburg over a R10.3 billion unfunded wage deal with a trade union supportive of Mashatile, which the minister called illegal, and over the city’s severe financial distress. The Common Sense reported that the city had R25.2 billion owed to creditors, only R3.9 billion in cash, R22 billion in irregular expenditure, and an unfunded budget.

The city is governed by an alliance that is in practice an ANC/EFF/uMkhonto weSizwe Party coalition – at odds with the national ANC/Democratic Alliance (DA) governing arrangement. The city and the province both refused ANC directives to align with the national unity government alliance.

Polls show that the DA campaign in the city is still around 10 points short of an outright majority and that the campaign has stalled. The DA in the city would need a coalition partner to govern but has no viable options in that regard at this time.