Newcastle Says KZN Treasury Got It Wrong: Municipality Disputes Budget Findings

Over a month later, the Newcastle Municipality has finally addressed the statements issued by the KwaZulu-Natal Department of Treasury concerning its conditional grant funding and budget. However, the municipality’s response appears to diverge significantly from the assertions made by the KZN Treasury.

As reported by Newcastillian News on 1 April 2025, the KZN Treasury announced that the National Treasury had halted funding for underperforming KZN municipalities.

At the time, the KZN Treasury stated that conditional grant funding to 25 municipalities, including Newcastle Municipality, had been suspended due to their persistent failure to meet performance expectations.

The KZN Treasury further disclosed that thorough assessments, conducted in collaboration with Provincial and National Treasury officials, revealed significant shortcomings in these municipalities’ performance against the objectives and targets outlined in various programmes.

These programmes encompassed the Energy Efficiency Demand Side Management (EEDSM), the Expanded Public Works Programme (EPWP), the Informal Settlements Upgrading Partnership Grant (ISUPG), the Integrated National Electrification Programme (INEP), the Municipal Infrastructure Grant (MIG), the Neighbourhood Development Partnership Grant (NDPG), the Public Transport Network Grant (PTNG), the Regional Bulk Infrastructure (RBIG), the Rural Roads Asset Management Systems Grant (RRAMS), and the Water Services Infrastructure Grant (WSIG).

Prior to this decisive measure, the KZN Treasury noted that a coalition of national departments—including the National Treasury’s Neighbourhood Development Partnership Programme, the Department of Water and Sanitation, the Department of Cooperative Governance, the Department of Public Works and Infrastructure, the Department of Transport, and the Department of Mineral Resources and Energy—had concluded that several municipalities were unlikely to fully utilise their allocated grants for the 2024/2025 financial year.

These departments subsequently petitioned the National Treasury to suspend portions of the conditional grant allocations to the underperforming municipalities, a request made under Section 18 of the Division of Revenue Act (DoRA), 2024, (Act No. 24 of 2024), as amended.

“However, Treasury opted to establish reasons for the anticipated underspending on the part of the municipalities in line with Section 18 of DoRa, as amended,” said KZN Treasury at the time.

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Then, on 7 April 2025, Newcastillian News reported that the Newcastle Municipality, alongside 12 other municipalities, had faced scrutiny from the KwaZulu-Natal Treasury for adopting unfunded budgets for the 2024/2025 financial year.

This followed a directive from KZN Finance MEC, Francois Rodgers, urging 13 municipalities within the province to reconsider their decision to adopt unfunded budgets.

At the time, MEC Rodgers stated, “The government of provincial unity will not tolerate poor financial governance as it threatens the state’s ability to provide much-needed services to communities. Municipalities must adhere to the legislation when approving budgets. Municipalities experiencing financial problems are urged to reduce non-essential expenditure and implement cost-containment measures.”

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After weeks of Newcastillian News seeking clarification, the Newcastle Municipality’s Communications Unit has now formally responded, casting doubt on the KZN Treasury’s claims.

When asked about the specific factors contributing to the municipality’s failure to meet the National Treasury’s performance expectations, which led to the suspension of conditional grant funding, the Communications Unit asserted, “We are not aware of any factors that led to suspension of any conditional grant funding by National Treasury. To date all conditional grants are spent accordingly. We have more grant funding (WSIG) allocated to the municipality in March 2025 due to acceleration of expenditure on the said grant.”

Furthermore, regarding MEC Francois Rodgers’ call to reconsider the unfunded budget and the steps Newcastle Municipality was taking to align its 2024/2025 budget with realistically anticipated revenue and available cash reserves, as mandated by the Municipal Finance Management Act (MFMA), the Communications Unit explained that it was compliant with section 16(2) of the MFMA, which requires mayors to table the annual budget in council at least 90 days before the start of the budget year, i.e. by 31 March each year.

“The draft budget was tabled by the mayor in March and submitted for consultation to the Provincial Treasury as legislated. Provincial Treasury submitted their inputs, and a meeting was held between them and the municipality as part of consultation on the tabled draft budget. Council will table the 2025-26 budget (with Provincial Treasury’s inputs) for adoption before the end of May 2026,” said the Communications Unit.

When questioned about measures to enhance revenue collection rates and implement cost-containment initiatives, given the three-year timeline set by the National Treasury to achieve a funded budget position, the Communications Unit highlighted that cost-containment measures and the Interim Finance Committee (IFC) were already operational within the municipality.

“The municipality tabled a funded draft budget in March 2025 and will be tabling a funded budget for adoption during the month of May 2025. Strategies outlined in cost containment measures and the IFC will continue to be implemented for the betterment of the municipality,” said the Communications Unit.

While repeatedly asserting that no funding had been suspended, the question remains: how will the municipality balance essential service delivery—such as water, electricity, and road maintenance?

“It is an open secret that the municipality is faced with financial constraints, however service delivery remains a priority. The strategies that are currently implemented include optimising our resources among other things, in order to improve service delivery,” emphasised the Communications Unit.

However, the conflicting narratives between the Newcastle Municipality and the KZN Treasury highlight a critical need for transparency and accountability in municipal financial management. As the municipality denies the suspension of conditional grant funding and asserts its commitment to a funded budget, residents await clarity on how these discrepancies will be resolved to ensure the uninterrupted delivery of essential services.

With the 2025/2026 budget adoption looming, the municipality’s ability to align with legislative requirements and implement effective cost-containment measures will be pivotal. The ongoing dialogue with the Provincial Treasury and the community’s trust in local governance hinge on the municipality’s capacity to address these challenges decisively, safeguarding the well-being of Newcastle’s residents.

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