National Treasury Demands R60.7m Refund from Makana Municipality for Unspent Infrastructure Grants

The Makana Municipality, located in the Eastern Cape town of Makhanda, South Africa, faces a significant financial challenge after being instructed by the National Treasury to return a substantial sum of R60.7 million. This repayment order, which represents 83% of its infrastructure grant allocation over two years, has emerged due to the municipality's failure to utilise the funds intended for critical infrastructure developments.

Residents of Makhanda have experienced the dire consequences of poor infrastructure, with many lacking consistent water access, electricity, and proper sanitation. The regional infrastructure grants were specifically meant to address such pressing issues, but apparent mismanagement has resulted in the grants remaining largely unspent, to the disillusionment of the populace.

In response, the Public Service Accountability Monitor (PSAM), operating out of Rhodes University in Makhanda, has publicly denounced the municipality's underspending as "shameful", indicating that the town's accelerated infrastructure deterioration is a direct result of the municipality's inaction.

The municipality's predicament is further complicated by its current financial instability, with insufficient cash reserves to repay the ordered amount. This shortfall could necessitate tapping into the municipality’s equitable share transfer — a move that might cripple its ability to fulfill its payroll commitments, according to the PSAM.

The financial strain on Makana Municipality is not a recent development. In 2020, driven by the Unemployed People’s Movement and supported by local businesses and the Residents’ Association, a high court judge ruled the service provision standard in Makana unconstitutional. Despite an appeal by Eastern Cape Premier Oscar Mabuyane, an agreement was eventually reached for a financial recovery plan, the details and progress of which remain under wraps.

A breakdown of the grants indicated a failure to allocate R21.7 million in 2021/22 and R22.7 million in 2022/23, as part of the Municipal Infrastructure Grant (MIG). The lack of effective planning and reporting at the senior management and council levels has been criticized by PSAM, with evidence of outdated reports and frequent meeting delays compounding the issue.

Plans to upgrade streets, wastewater treatment facilities, and sports infrastructure have stalled, compounding the frustration of residents who see little improvement in their daily lives. Philip Machanick, the outgoing chairperson of the Makana Residents’ Association, calls the situation "an absolute disgrace", with the municipality's role in improving roads questioned amid visible outsourced efforts.

Makana Municipality has yet to formally respond to the Treasury's order, although it had previously contested similar directives regarding financial mismanagement.

Calls for the municipality to be dissolved have grown louder, particularly from Democratic Alliance representatives Kevin Mileham and Dr. Vicky Knoetze, who cite incompetence and lack of financial reserves as key reasons for such a drastic measure. Despite a financial recovery plan being mandated, the lack of substantial implementation reports or measures fuels concern from various stakeholders, and the impending repayment could further exacerbate the administrative chaos.