This was confirmed by the MEC for Treasury, Gadija Brown. She says all provincial departments have reached a directive from the National Treasury that municipalities would not be bailed out anymore. Brown says instead, these municipalities have been encouraged to stimulate and enhance their revenue collection campaign to ensure that workers and services are paid. OFM News previously reported that eleven municipalities, including the Trompsburg-based Kopanong Local Municipality, had approached Cooperative Governance and Treasury for a bailout after failing to pay salaries due to cash flow issues, which were said to be linked to the low revenue collection.

ALSO READ: Eleven Free State municipalities beg for bailout

“Our economy, as we all know, is under huge pressure. We know that it is related to Russia and Ukraine challenges that we are seeing. Inflation has gone up, we find that the debt [in relation] to the Gross Domestic Product (GDP) has gone up and we are looking at a deficit of 15,9% - not only at national level, but also at the level of local government. And what we have encouraged our municipalities to do first and foremost, is to drive the restricting of the economy so that we can have more people working, paying taxes and rates within the economy, to assist with that budget deficit. 

"In terms of salaries, when we looked at the budget at the beginning of the year, there was sufficient equitable share to sustain salaries across the financial year and we also encouraged municipalities to do that. Historically what we've found, was that there would be a cross-subsidy against the conditional grant and equitable shares and that placed pressure on the equitable share to pay salaries. The national treasury has given us the guidelines - we do not do bailouts. So, the issue of the bailout to municipalities no longer exists and it has been a huge debate because the people are contributing to that local economy which then brings back the issue of rates and taxes, so you are caught between a rock and a hard place, unfortunately. So what we are trying to do with municipalities is that we are trying to get them to a point where they can go out to bank and do a loan until the salaries process is concluded, based on the current financial year,” Brown says.

Earlier this year, the Cogta spokesperson, Sello Dithebe, told OFM News that municipalities - in their bid to get financial assistance - claim they are experiencing cash flow problems. Dithebe said bailing out these struggling municipalities is not only against the law but is also not sustainable.

“National Treasury has advised against the provincial departments of Finance, Cooperative Governance and Traditional Affairs, or the provincial government, funding the salaries for municipalities. In fact, it would be against the law and is not sustainable. National Treasury, as far back as 2017, came up with an instrument called the Municipal Standard Chart of Accounts (MSCOA), which has about seven segments. One of them is to ensure that there is financial stability in various municipalities,” he added.

Concerns have been raised over Kopanong, which is yet to pay workers' salaries for September 2022. 

ALSO READ: Free State municipality yet to pay over 450 workers

Unions and political parties have since demanded serious intervention by the provincial government to rescue the situation in the troubled municipality.

ALSO READ: Concerns raised over cash-strapped Free State municipality

The municipality has since threatened to go after businesses and residents who fail to pay for services rendered.

Municipal spokesperson, Solomzi Phama, told OFM News that all bets are off to try to recoup millions owed to the municipality by businesses and others. He said as of Wednesday 26 October 2022 the municipal officials will embark on a rigorous plan to try to recoup this money owed to the municipality by the aforementioned parties.

ALSO READ: Free State municipality to recoup owed monies

In June this year, another ailing Free State municipality, Masilonyana, gave its employees R1000 food vouchers following the non-payment of salaries.

ALSO READ: FS municipality offering food vouchers to unpaid workers

OFM News