Johannesburg is effectively bankrupt — and the national government must now decide what happens next.
That was the blunt message from DA mayoral candidate Helen Zille on Wednesday, following an extraordinary letter from finance minister Enoch Godongwana to Johannesburg mayor Dada Morero that laid bare the full scale of the city’s financial collapse.
Speaking at a media briefing on Wednesday, Zille said a strongly worded letter from Godongwana to Morero warned that failure to act could have devastating consequences for residents and the broader economy.
“In all my years in politics, I haven’t read a letter quite so forthright and quite so blunt with such devastating consequences if the actions stipulated in that letter are not taken,” said Zille.
She said the minister’s letter effectively declared Johannesburg bankrupt: “It owes its creditors R25.2bn while only having cash and cash equivalents in hand of R3.9bn. This means the city does not have the money to pay R21.3bn currently owed to its creditors,” she said.
She linked the financial crisis directly to the collapse of basic services across the city.
“It explains why no circuit breakers can be replaced in substations; why there are no spare parts to fix water leaks; why nothing can be done to maintain, and fix the collapse of services across Joburg,” she said.
According to Zille, the minister attributed the crisis to unlawful decisions and governance failures, warning these could have long-term consequences beyond the current administration and could affect the national economy.
Godongwana’s letter warns that the Treasury could invoke section 216(2) of the constitution and withhold Johannesburg’s equitable share, which is estimated at more than R8bn if the city fails to urgently correct its finances.
“That will be the final nail in the City of Johannesburg’s financial coffin,” said Zille.
She noted that these funds are critical for subsidising services to poorer households and maintaining essential infrastructure.
Zille said placing the city under administration in terms of section 139 of the constitution would come with severe political and financial consequences.
“Putting the city under full administration means the dissolution of the city council, and we would have to have another election when we’ve already got an election coming up,” she said.
She added that such a move could leave councillors without salaries and potentially see national government take over the running of the city.
Zille suggested the minister may opt for a less drastic route.
“We may be in a situation where the minister finds a way of putting the city under financial administration rather than dissolving the council as a whole,” she said.
Zille outlined a series of recent setbacks that have compounded the crisis, including the following:
- A refusal by the French Development Agency to grant a R2.5bn loan due to non-compliance with previous conditions.
- The suspension of the city’s bonds by the JSE for failing to submit financial statements on time.
- Warnings of a potential credit rating downgrade.
- Expected regression in audit outcomes.
“That’s a very serious warning to investors, [saying], ‘Don’t trust this city and its bonds because they’re not managing their finances’,” she said.
In his letter, Godongwana said the Treasury had observed “a series of violations” of the Municipal Finance Management Act (MFMA), pointing to a deterioration in governance and financial health.
“The adjustments budget was assessed to be unfunded; revenue collection was overstated while expenditure was understated,” he wrote.
He warned that this could result in unauthorised expenditure by June, further worsening the city’s financial position.
Severe financial distress
The Treasury also highlighted weak revenue collection, overexpenditure of about R3.9bn on operational costs, concerns about inflated revenue projections at Johannesburg Water, and failure to pay suppliers within 30 days, in violation of the MFMA.
“This is a marker of severe financial distress indicating that the city does not have the liquidity required to pay its creditors,” said Godongwana.
Godongwana also criticised a wage agreement between the city and the South African Municipal Workers Union, warning it could deepen the crisis.
“The city signed an agreement … committing to R10.3bn in salary increases over the next two years … it is unclear how it intends to fund these salary increases,” he said.
He instructed the city to halt implementation of the agreement, describing it as potentially destructive to the city’s sustainability.
The minister further flagged failures in Johannesburg’s financial systems, including noncompliance with municipal Standard Chart of Accounts (mSCOA) regulations.
“Less than 30% of the city’s financial applications are integrated into its enterprise system …. The continued reliance on hybrid processes exposes the city to reporting challenges,” he said.
DA councillor Belinda Kayser-Echeozonjoku also accused the city of widespread mismanagement and possible corruption.
“There’s definitely large-scale looting going on. Councillors have to revert to PAIA requests instead of getting answers, which shows us that they are looting because they are refusing to account,” she said.
She also criticised the city’s reliance on loans instead of grant funding and called for investigations into its use of water tankers.
When asked what should be the next course of correction, Zille said the situation now rests with Godogwana, who must decide whether to intervene.
“I think that question has to go to the minister himself,” she said.
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