ANNEXURE H
Stopping of funds to municipalities
38. (1) The National Treasury may stop-
(a) the transfer of funds due to a municipality as its share of the local
government's equitable share referred to in section 214(l)(a) of the
Constitution, but only if the municipality commits a serious or persistent
breach of the measures established in terms of section 21 6( 1) of the
Constitution; or
(b) the transfer of funds due to a municipality as an allocation referred to in
section 214(l)(c) of the Constitution, but only if the municipality or the
municipal entity for which the funds are destined-
(i) commits a serious or persistent breach of the measures established in
terms of section 216(1) of the Constitution; or
(ii) breaches or fails to comply with any conditions subject to which the
allocation is made.
(2) Before the National Treasury stops the transoffe rf unds to a municipalitiyn terms
(a) give the municipality an opportunity to submit written representations with
(b) inform the MEC for local government in the province; and
(c) consult the Cabinet member responsible for the national department making
(3) If the stoppingo f funds in termso f subsection ( l ) ( a )o r (b)a ffects the provisiono f
basic municipal services in the municipality, the provincial executivme ust monitor the
continuation of those services. Section 139 of the Constitution applies if the
municipality cannot or does nfoutl fil its obligationsw ith regard to the provisioonf those
services.
(4) When considering whether to stop the transfeorf funds to a municipalityin terms
of subsection (l)(a) or (b)(i), the National Treasury must take into account all relevant
facts, including-
(a) the municipality’s compliance with the requirements of this Act, in particular
those relating to-
(i) annual financial statements, including the submission to the Auditor-
General of its annual financial statements; and
(ii) budgets, including the submission of information on the budget and
implementation of the budget to the National Treasury and the relevant
provincial treasury; and
(b) the municipality’s co-operation with other municipalities on fiscal and
of subsection (l)(a) or (b), it mustregard
to the proposed stopping of the funds;
the transfer.
financial matters, in the case of district and local municipalities.
Stopping of equitable share allocations to municipalities
39. (1) A decision by the National Treasury to stop the transfer to a municipality of
(a) lapses after the expiry of 120 days, subject to approovfa tlh e decision in terms
of paragraph (b) of this subsection and renewal of the decision in terms of
subsection (2); and
(b) may be enforced immediately, but will lapse retrospectively unless Parliament
approves it following a process substantially the same as that established in
terms of section 75 of the Constitution, and prescribed by the joint rulesa nd
orders of Parliament. This process must be completed within 30 days of the
decision by the National Treasury to stop the transfer of the funds.
(2) Parliament may renew a decision to stop the tranofs ffeurn ds referredt o in section
38( l ) (a)f or no more than 120 dayast a time, following the process establisheidn terms
of subsection (l)(b) of this section.
(3) Before Parliament approves or renews a decision to stop the transoffe fru nds to a
municipality-
(a) the Auditor-General must report to Parliament, if requested to do so by
(6) the municipality must be given an opportunity to answer the allegations
funds referred to in section 38( l)(a)-
Parliament; and
against it, and to state its case, before a committee.
