PRETORIA, Gauteng — The National Treasury has frozen R13.5 billion in July 2026 equitable share grants for 69 municipalities across all nine provinces, including major metros like the City of Johannesburg, Nelson Mandela Bay, and Mangaung. The unprecedented funding freeze, driven by persistent non-compliance with the Municipal Finance Management Act (MFMA), has sparked widespread discussions among governance experts, civil engineers, and parliamentary leaders regarding the deep-rooted financial mismanagement and systemic governance failures plaguing South Africa’s local government sphere.
A Corrective Measure Amidst Financial Mismanagement
The Treasury emphasized that the withholding of funds is a corrective, rather than punitive, measure, insisting that no disruption to basic services is expected. The intervention follows years of guidance, training, and support that have been ignored by the affected municipalities. According to the Treasury, these local authorities have repeatedly failed to adopt funded budgets, pay creditors on time, investigate irregular spending, recover losses, or take disciplinary action against errant officials.
The affected municipalities were given advance notice and an opportunity to explain why their funding should not be withheld. To restore their funding, the Treasury has mandated that these municipalities implement a 30% downward reduction in Unauthorized, Irregular, Fruitless, and Wasteful (UIFW) expenditure by the 30th of September.
Engineering Deficits and Infrastructure Decay
South African Institute of Chartered Accountants (SAICA) director Wynand Dreyer, highlighted that the crisis is fundamentally a governance and technical capacity issue. Dreyer noted that municipal entities are being run without the requisite professional engineering oversight. He pointed to a constitutional barrier that grants municipalities autonomy over water, sanitation, and electricity distribution, regardless of whether they possess the technical capacity to deliver these systems.
Furthermore, municipal-owned entities like Johannesburg Water and City Power operate in a budget vacuum. Historically, their revenue was ring-fenced for capital expenditure and maintenance, but today, revenue flows into a general municipal pot. Dreyer stressed that while 8% of an asset’s value should be allocated annually for maintenance, many municipalities allocate a mere 0.5% to 1%.
“Politicians want to make decisions without the benefit of an engineering background,” Dreyer explained, noting that maintenance budgets are cut to shreds, and some smaller municipalities do not employ a single technically qualified person on staff.
Systemic Failures, Syndicate Capture, and the Leadership Crisis
Alex Van Den Heever, a governance professor at the Wits School of Governance, argued that the Treasury’s intervention is a remedial “soft measure” that fails to address the core leadership crisis. He noted that while the City of Johannesburg must pay R1.4 billion in current liabilities to Eskom and Rand Water by mid-July, the Treasury is withholding funds to compel a payment plan. However, this does not address the nearly R10 billion in historical back payments owed to Eskom, nor the R10 billion in historical back payments owed to union workers.
Van Den Heever warned that many municipalities are captured by syndicates, leading to a total collapse of governance. “The wrong people are in charge, and these measures don’t deal with that,” he stated. He criticized the lack of interim accountability mechanisms, such as criminal referrals for accounting officers who willfully breach the MFMA year after year. He also highlighted the collapse of municipal revenue collection systems, which require investment and maintenance just like physical infrastructure. Ultimately, he pointed to the November 4 elections as the final cure, but stressed that interim consequences for misconduct are severely lacking.
Parliamentary Backing and the Consequence Management Deficit
Dr. Zweli Mkhize, Chairperson of the Portfolio Committee on Cooperative Governance and Traditional Affairs (COGTA), welcomed the Treasury’s decision, confirming the severity of the financial mismanagement. Following nationwide visits, Dr. Mkhize’s committee identified a high number of Auditor-General disclaimers, late financial statements, and uninvestigated procurement irregularities.
He cited a stark lack of consequence management, pointing to Maluti-a-Phofong, where a CFO remained in office for eight years despite repeated audit disclaimers, and Nelson Mandela Bay, where “evergreen” contracts were extended up to ten times over a decade without competitive bidding. Dr. Mkhize also highlighted the crisis in Johannesburg’s waste management utility, Pikitup, as a direct result of unfunded budgets—where councils commit to spending billions they cannot raise, leading to massive deficits and unpaid debts to Eskom and waterboards.
Furthermore, Dr. Mkhize condemned the growing, expensive reliance on consultants. Originally intended as a temporary measure to close capacity gaps, it has become a permanent feature that yields no improved audit outcomes. He emphasized that consequence management must flow hierarchically, from supervisors to municipal managers, mayors, and entire councils, including the speaker and councilors.
Provincial Oversight and the Road to Compliance in Gauteng
Gauteng Finance MEC Nkululeko Dunga acknowledged the severe challenges facing the province’s municipalities, including infrastructure decay, service provider frustrations, and unpaid employee increments. While the Executive Mayor of Johannesburg maintained that the city’s 2026/2027 budget is fully funded and compliant, Dunga noted that metros like Johannesburg, Ekurhuleni, and Tshwane report directly to the National Treasury. He revealed that entities like Job Water and City Power had to secure a R3.5 billion loan just to maintain infrastructure and pay contractors.
Dunga highlighted that out of 11 municipalities in Gauteng, only Midvaal and the West Rand district achieved clean audit outcomes. He pointed to an accumulative R45 billion in irregular expenditure, with R20 billion attributed purely to the three major metros, alongside poor-quality performance reports that fail to align budgets with actual service delivery.
To combat this, the Gauteng Premier, Panyaza Lesufi, introduced an Auditor-General recommendations tracker to ensure strict enforcement. Dunga confirmed that the provincial Treasury is actively equipping CFOs and audit committee chairs through workshops with COGTA and the South African Local Government Association (SALGA).
Emphasizing that Chapter 9 institution recommendations are not subject to debate but must be implemented as prescribed, Dunga warned that failure to enforce these recommendations could lead to legal consequences, including jail time for accounting officers and senior managers. “We are going to ensure that we comply to that 30% downward in terms of UIFW by the 30th of September,” Dunga affirmed, signaling a stringent approach to restoring financial health and accountability to the province’s municipalities.
