The Minister of Cooperative Governance and Traditional Affairs, Velenkosini Hlabisa, and the Minister of Finance, Enoch Godongwana, on Tuesday briefing members of the media on the temporary withholding of Municipal Equitable Share transfers.
Image: GCIS
The National Treasury and the Department of Cooperative Governance and Traditional Affairs (Cogta) have warned municipalities that future equitable share allocations will depend on improved compliance, despite the decision to release the remaining withheld July 2026 transfers from 31 July.
Finance Minister Enoch Godongwana said the release of the outstanding Local Government Equitable Share allocations should not be interpreted as an indication that affected municipalities had met the requirements of the Municipal Finance Management Act (MFMA) or addressed weaknesses in their financial governance.
Godongwana had earlier this month withheld equitable share transfers to 69 municipalities because of concerns over financial mismanagement. The decision followed a comprehensive assessment process and active monitoring of compliance in terms of section 216(2) of the Constitution and the applicable provisions of the MFMA.
He said National Treasury’s assessments identified material and ongoing weaknesses in the management of unauthorised, irregular, fruitless and wasteful expenditure (UIFWE), financial misconduct investigations, disciplinary processes, consequence management and broader municipal financial governance.
"I want to make it clear that the decision to release the remaining transfers does not mean that the affected municipalities have satisfied the requirements of the MFMA, the Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings, or the requirements previously communicated in my letters addressed to the respective mayors and the press statement released by the department earlier this month," he said.
Treasury decided to release the funds on 31 July because the withholding period had reached nearly 30 days and extending it could have adversely affected the delivery of basic municipal services.
"The equitable share is an important source of funding for basic services, particularly services provided to poor households. National Treasury must therefore balance its constitutional responsibility to enforce financial management requirements; with the need to avoid communities carrying the immediate consequences of failures by municipal institutions and officials," Godongwana said.
He stressed that the release should be viewed as a conditional measure intended to protect service delivery while requiring municipalities to correct serious governance deficiencies.
Since the process began, 20 municipalities have received their full equitable share allocations. The remaining 49 municipalities will receive outstanding allocations on Friday, with 21 municipalities having already received partial transfers while 28 municipalities had not received any allocations to date because of non-compliance.
Godongwana said the first formal reporting deadline remains 30 September 2026. Municipalities must submit quarterly reports and supporting evidence and demonstrate progress in addressing and reducing UIFWE.
"National Treasury will then require further measurable improvement during October and November 2026," he said, adding that Treasury would continue supporting municipalities to avoid another withholding of equitable share transfers in December 2026 and March 2027.
Minister of Cogta Velenkosini Hlabisa said the departments had agreed that municipalities must use public funds prudently and meet their financial obligations.
“That money must be used prudently and every organ of the state that needs to be paid the obligation lies with the municipality to do so,” Hlabisa said.
He said Cogta, Treasury, the South African Local Government Association (Salga), provincial governments and municipalities would work together ahead of the next allocation cycle in December
“A simple message going forward to all municipalities is that when communication letters are sent, municipalities must respond,” Hlabisa said.
He added that government departments that owe municipalities billions of rand for services rendered should also be held accountable, arguing that municipalities need those payments to settle debts owed to Eskom, water boards, medical schemes and pension funds.
With local government elections approaching, Hlabisa warned against allowing municipalities to collapse under financial strain and urged organised labour to participate in efforts aimed at restoring municipal financial stability.
“That is why we will follow a similar approach with national departments and provincial departments. We want to urge the labour sector to be part of this engagement because workers become the ones who suffer when stringent measures are introduced,” he said.
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