R54bn performance-based grant launched to support metro infrastructure delivery

The National Treasury has officially launched a R54-billion performance-based grant in a bid to increase investments in water, sanitation, electricity and waste infrastructure services by the country's eight metropolitan municipalities, or metros.

Known as the Metro Trading Services Reform, the performance-linked incentive aims to mobilise more than R100-billion in infrastructure investment over the coming six years, with recipient municipalities required to match the infrastructure grants with their own revenues and borrowings.

A total of R27-billion has been set aside for the scheme in the current three-year expenditure framework, which was outlined in the February Budget.

Speaking at the launch, National Treasury director-general Dr Duncan Pieterse said the incentive would be made available to those metros that meet performance targets which they have set for themselves under 'Performance Improvement Action Plans' developed for each of their trading services.

"The Metro Trading Services Reform aims to ensure those services are run like integrated businesses.

"It creates a single unit of management accountability to deliver core trading services.

"It will ringfence the revenues and reinvest them in those services," Pieterse said at the launch function in Pretoria attended by various partners to the initiative, including the World Bank, the New Development Bank, the Asian Infrastructure Investment Bank, and representatives from country partners such as Switzerland, Denmark, Germany and France.

He said the scheme had been implemented in a context where many metros were failing to provide services or to collect revenue adequately.

"Even when they do, the revenue they collect goes into the general municipal pot, instead of being invested to maintain and upgrade infrastructure. As a result, the water leaks, the lights go out, the rubbish piles up."

He made specific reference to the City of Johannesburg, where its 2025/26 budget for 2025/26 estimated that R11.9-billion in revenue for water would be collected, but it would spend only R1.3-billion on water infrastructure, or less than 10%.

"eThekwini plans to collect R22-billion in 2025/26 from electricity charges. Almost 85% of this will pay for bulk charges to Eskom and the city plans to spend only R784-million on electricity infrastructure – so not even 5%," he added.

The Metro Trading Services Reform, he added, formed part of a comprehensive package of local government reforms that moved beyond oversight of local government towards more active intervention, including interventions to address capacity constraints to deliver infrastructure.

It also came as municipalities were expected to spend R205-billion of the R1-trillion that had been budgeted for infrastructure by government over the coming three years.

Pieterse said there was also an intention to break from past practices whereby funds were reallocated to other municipalities when a municipality was unable to spend its infrastructure budget.

"In effect, residents in those underspending municipalities would then lose the funding, in favour of those with better capacity.

"When the Budget was tabled in February, we included a new proposal: where municipal capacity to spend becomes a problem, instead of the funds being lost they will be transferred to entities such as the Development Bank of South Africa and the Municipal Infrastructure Support Agency, to ensure the spending takes place in that municipality to benefit the residents who live there."

The Metro Trading Services Reform has the support of the Department of Cooperative Governance and Traditional Affairs and the South African Local Government Association (Salga).

However, Salga CEO Sithole Mbanga stressed at the launch that the metros needed to be co-architects of the reforms and "not implementers of someone else's blueprint".

The metros, he noted, were also insisting that any structural...