Joburg could be placed under administration after missed budget deadline

The City of Johannesburg could be placed under administration after it missed the deadline for passing its budget before the start of the financial year, BusinessLIVE reported.

Johannesburg — SA’s economic hub, its richest city and the municipality with the biggest budget — was initially set to pass its budget on Tuesday, but for the first time since the Municipal Finance Management Act came into effect in 2003, it was unable to do so.

Not passing the budget means that the municipality can’t spend any money until a budget is passed, as this would amount to irregular and unauthorised expenditure.

In the broader sense, the question then becomes: if a city such as Johannesburg cannot pass its budget, what does that mean for smaller municipalities?

Tuesday’s council meeting was already cutting it fine, as it was one day before the start of the new financial year for municipalities. It was cancelled after mayor Geoff Makhubo requested the postponement due to “a need for the political parties in the council to further consult, a process largely hindered by the current Covid-19 pandemic”.

A new meeting was scheduled for Thursday, but this meeting has also been postponed until further notice.  

The council is a hung municipality, which is governed by an ANC-led coalition. Given the fractious political nature of the council, either the DA or the EFF, respectively the second and third largest parties in the council, had to be brought on board to pass the budget.

Given difficulties in previous years in passing the budget as a result of the council’s politics, it was not unexpected that the new coalition would face similar challenges. But the consequences for not passing the budget can be severe, and in a worst-case scenario could lead to the dissolution of the council.

Section 139 (4) of the constitution provides that if a municipality cannot or does not fulfil an obligation in terms of the constitution or legislation to approve a budget or any revenue-raising measures necessary to give effect to the budget, the provincial government must intervene by taking any appropriate steps to ensure that the budget or those revenue-raising measures are approved.

This includes dissolving the municipal council appointing an administrator until a new council is elected, and approving a temporary budget or revenue-raising measures to ensure the continued functioning of the municipality.

The provincial government is yet to indicate what steps it will take.

Former mayor Herman Mashaba said it will have to be seen whether co-operative governance MEC Lebogang Maile will place the city under administration and dissolve the council.

“The MEC has demonstrated a drastic approach to municipalities not under the governance of the ANC. Johannesburg was previously threatened with administration by the MEC on a regular basis for matters that did not warrant such drastic action,” he said.