The equitable share is a critical source of funding for the Nelson Mandela Bay Municipality (NMBM), enabling it to perform its constitutional mandate of service delivery.
Nelson Mandela Bay’s Equitable Share for 2025/26
According to the South African National Treasury’s allocations published for the 2025/26 financial year (which begins on July 1, 2025), the Nelson Mandela Bay Municipality is allocated approximately R1.643 billion (R1,643,573,000) as its Local Government Equitable Share.
This figure is part of the national Division of Revenue Act (DoRA) and represents a regular annual transfer.
What is the ‘Equitable Share’?
The concept of the ‘Equitable Share’ is enshrined in Section 214 of the South African Constitution.
Definition: It is an unconditional transfer of funds from nationally collected revenue (taxes, etc.) to the provincial and local spheres of government.
Purpose: Its primary goal is to enable municipalities to provide basic services and perform the functions assigned to them, particularly by subsidising the costs associated with delivering free basic services to indigent households (e.g., free water, sanitation, and electricity units) and contributing towards administrative and community services.
Calculation:
The amount allocated to each municipality is determined by a complex formula that considers:
- The total number of households below an affordability threshold (the poor).
- The estimated cost of providing basic services (water, sanitation, refuse removal, energy) to these households.
The municipality’s own fiscal capacity (its ability to raise revenue through rates and tariffs). Municipalities with lower capacity receive a greater subsidy.
Caveats on Spending the Equitable Share
The Local Government Equitable Share (LGES) is unique among government grants because it is legislatively considered an unconditional transfer, but its spending is still governed by strict principles.
1. Unconditional Nature (Flexibility)
- No Specific Project Mandate: Unlike Conditional Grants (which must be spent on a specific function, like the Municipal Infrastructure Grant or MIG), the Equitable Share does not come with specific, predetermined project or spending conditions imposed by the National Treasury.
- Discretion: The municipality’s council determines the final priorities for how the LGES is allocated within its Integrated Development Plan (IDP) and budget.
2. Constitutional Purpose (Constraint)
Despite being “unconditional,” the Equitable Share has an overarching purpose that acts as a fundamental constraint:
- Primary Use: The funds are fundamentally intended to subsidise the provision of basic services to poor households and cover the administrative costs of core municipal functions where local revenues are insufficient.
- Misuse Risk: Because it is unconditional, the funds are susceptible to being diverted to other expenses. The Municipal Finance Management Act (MFMA) and the annual DoRA require the municipality to spend the funds in accordance with the Constitution, applicable legislation, and its approved municipal budget.
3. Monitoring and Consequences
- Treasury Oversight: The National Treasury closely monitors the financial health and management of municipalities like Nelson Mandela Bay.
- Threat to Withhold: In previous years, the Treasury has publicly threatened or even temporarily withheld tranches of the Equitable Share payments from NMBM due to the city’s severe financial crisis, specifically its failure to address massive amounts of unauthorised, irregular, fruitless, and wasteful expenditure (UIFWE).
- Mandate: While the allocation is technically unconditional, the ability of the municipality to continue receiving future payments is directly contingent on demonstrating good governance, financial viability, and addressing its audit issues.
