PRETORIA, SOUTH AFRICA — In a decisive move to enforce fiscal discipline, South African municipal funding has been temporarily withheld from 69 local councils. Finance Minister Enoch Godongwana confirmed that the suspension of the July 2026 equitable shares is a critical intervention aimed at ensuring legal compliance and rescuing failing service delivery across the country.
During an interview with SAnews on the sidelines of a media briefing on Friday, the Minister addressed the fallout of the announcement, explaining that the drastic step was necessitated by a persistent pattern of financial mismanagement at the local government level.
The National Treasury intervened after a significant number of municipalities continued to adopt unfunded budgets and accumulate massive volumes of Unauthorised, Irregular, Fruitless, and Wasteful Expenditure (UIFWE). Furthermore, these councils failed to honor their statutory financial obligations to critical entities, including Eskom, regional water boards, the South African Revenue Service (SARS), the Auditor-General, and various pension funds.
A Historic Intervention for Service Delivery
Reflecting on the historical context of these financial interventions, Godongwana noted that while the Treasury engages in this practice annually, the current scale is unprecedented in recent years.
“We have been doing it every year but on a smaller scale. Of this size, we’ve last done it in 2016. Every year, we’re fighting with municipalities. Sometimes we take money from one municipality to another, we say to a municipality: you are not performing and we will take your equitable share,” Godongwana explained.
He stressed that the ultimate objective of the freeze is not punitive, but rather corrective. “It’s precisely this that will enhance service delivery because we are forcing municipalities to perform. It’s going to improve and enhance,” he added.
The Roadmap to Financial Recovery
The Finance Minister clarified that the withheld funds are not permanently lost and provided a clear, three-step roadmap for municipalities to regain access to their equitable shares, depending on the specific nature of their financial offenses:
- Unfunded Budgets: Municipalities must collaborate directly with Treasury officials to draft a long-term transformation strategy, creating a viable plan to transition into a fully funded budget. Once an agreement is reached, the council is removed from the list.
- Unpaid Creditors: Councils in arrears must submit a formal, binding payment schedule, committing to a structured timeline to settle their debts with relevant creditors.
- Fruitless and Wasteful Expenditure: Following Auditor-General findings, the Municipal Public Accounts Committee (MPAC) must review the issues at the municipal level. The MPAC is required to make recommendations to the council, which must then formally approve them and implement strict consequence management where necessary.
The strict enforcement has already yielded quick results. The Minister noted that some municipalities have successfully satisfied the Treasury’s requirements and will have their equitable shares, or a portion thereof, released as early as next week.
However, Godongwana emphasized that legislative and structural reforms will ultimately fail without active cooperation from local government structures. “Reforms must be accompanied by making sure that people are performing. If you have reforms and you don’t have willing partners to participate, the reforms are not going to be effective,” he stated.
A “Sobering” Picture of Municipal Debt
The sheer scale of municipal financial mismanagement was laid bare in a recent press statement from the National Treasury, which painted a “sobering” picture of local government finances. The data highlights a systemic crisis in municipal money management:
- Fruitless and Wasteful Expenditure: R24.12 billion has been lost since the 2021–22 financial year.
- Irregular Expenditure: A staggering R145.21 billion has been accumulated, with R40.14 billion of that incurred in the 2024–25 financial year alone.
- Unauthorised Expenditure: R118.13 billion has been disclosed, with more than half of this amount tied to non-cash budget items.
The Cost of Non-Compliance
The Treasury warned that this widespread financial negligence has severe downstream effects. It threatens the viability of bulk infrastructure suppliers, undermines statutory bodies, and directly disrupts essential services to citizens. When service providers go unpaid, it inevitably leads to crippling penalties, compounding interest charges, and severe service interruptions.
Furthermore, the failure to process UIFWE through Municipal Public Accounts Committees continues to erode public trust and accountability at the local level.
Invoking constitutional powers to freeze these funds is a deliberate signal from the government that the era of financial impunity is ending.
“South Africans deserve municipalities that are financially sound, accountable, and capable of delivering services,” Godongwana concluded. “By invoking the Constitution, we are signalling seriousness about governance, fiscal responsibility, and the rule of law.”
