Salga demands release of withheld municipal funds as Councils hit by Treasury decision

Banele Ginindza

The South African Local Government Association (Salga) has called for the immediate release of funds after formally engaging the National Treasury over concerns about the process used to withhold the December 2025 Local Government Equitable Share (LGES) tranche from at least 75 municipalities.

Salga said the LGES, one of three annual tranches disbursed by National Treasury, is a critical funding mechanism that enables municipalities to deliver basic services and promote equitable service delivery.

The withholding of the December tranche has had direct and serious implications for affected municipalities across the country.

Salga spokesperson Tebogo Mosala over the weekend said the association had identified significant shortcomings in the process followed by National Treasury, particularly around communication with municipalities.

"Notably, there was a lack of consistency in communications with the affected municipalities. Treasury’s correspondence was often unclear regarding the specific information or documentation required to rectify identified non-compliances," Mosala said in response to questions.

He added that in several cases, submission deadlines were not clearly communicated, leaving municipalities uncertain about compliance timeframes. Even where municipalities submitted responses, they received no feedback on whether the information was sufficient until the date the LGES tranche was withheld.

"Salga has called on the National Treasury to immediately release the LGES tranche for all municipalities that have adequately responded and complied with the requirements," Mosala said.

"In addition, Salga advocates for the establishment of a formal, transparent, and time-bound process within the Division of Revenue Bill (DORA) for the withholding of equitable share allocations. Salga also recommends that structural engagements be facilitated through Intergovernmental Relations (IGR) platforms to improve coordination and oversight." 

Salga said that since September 2025, National Treasury issued two circulars indicating its intention to invoke Section 216(2) of the Constitution and Section 38 of the Municipal Finance Management Act (MFMA) to withhold LGES allocations. These provisions allow for the withdrawal of funding that supports core municipal functions.

In response, Salga said it made several attempts to engage Treasury to avert the withholding of funds and to assist municipalities in meeting legislative requirements ahead of the December payment.

"Despite Salga’s repeated efforts, the National Treasury did not provide the necessary cooperation. This hindered Salga’s ability to help municipalities address compliance issues and avoid the withholding of funds," the association said.

"Salga continues to emphasise the necessity for municipalities to adhere to all relevant legislation and remains committed to supporting local governments in fulfilling their legislative obligations." 

While emphasising the importance of legislative compliance by municipalities, Salga said it remained committed to supporting local government in meeting its obligations.

The association also called on National Treasury to apply Section 216(2) of the Constitution and Section 6(2)(f) of the Public Finance Management Act consistently across all spheres of government, including national and provincial departments and entities that owe municipalities money or are non-compliant with Unauthorised, Irregular, Fruitless and Wasteful Expenditure (UIFWE) regulations.

"Salga will continue to liaise with the National Treasury to clarify any outstanding requirements for impacted municipalities. The goal is to ensure the timely release of the outstanding Local Government Equitable Share tranche and to safeguard service delivery at the local government level."  

According to a circular Salga issued to municipalities last week, the LGES withholding is linked to various UIFWE-related compliance issues. These include unclear budget funding plans, irregularities identified by the Auditor-General of South Africa, outstanding pension fund submissions, South African Revenue Service compliance issues and water board arrears.

Mosala said Salga was unable to quantify the total value of the withheld equitable share and confirmed that the association had requested further clarity from Treasury on several aspects of the process.

Provincially, the North West is the most affected, with 15 municipalities impacted, followed by the Free State with 12 and Gauteng with 10. The Eastern Cape and KwaZulu-Natal each have eight affected municipalities, while the Northern Cape has seven. Limpopo, Mpumalanga and the Western Cape each have five municipalities affected.

National Treasury had not responded to requests for comment at the time of publication.

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