The National Treasury has withheld transfers to dozens of municipalities a month after Finance Minister Enoch Godongwana notified his Cooperative Governance and Traditional counterpart Velenkosini Hlabisa of his intention to do so.
Image: Phando Jikelo / Parliament of SA
The National Treasury on Tuesday announced the withholding of the July 2026 equitable share transfers to 69 municipalities across the nine provinces due to their failure to comply with financial regulations.
The Treasury said the exercise was aimed at instilling fiscal discipline and ensuring that public money is properly managed, that unauthorised, irregular, fruitless and wasteful expenditure (UIFWE) is addressed and that municipal officials and office-bearers are held accountable where required by law.
“The decision follows persistent and serious non-compliance with the Municipal Finance Management Act (MFMA) and its supporting regulations, despite support provided by the National Treasury through guidance, engagement, and formal or informal communication,” it said in a statement.
This comes a month after Finance Minister Enoch Godongwana informed his Cooperative Governance and Traditional Affairs counterpart, Velenkosini Hlabisa, that he intended to withhold millions of rand in grants to several municipalities for their failure to settle billions in debt.
The affected municipalities are 16 in the Free State, 12 in the North West, 11 in the Northern Cape, seven in KwaZulu-Natal, six in the Eastern Cape and Gauteng, five in Limpopo, and three each in Mpumalanga and the Western Cape.
The National Treasury said the withholding of funds was in line with the Constitution and the Municipal Finance Management Act.
Since 2021-22, municipalities have incurred a total of R24.12 billion in fruitless and wasteful expenditure and R145.21 billion in irregular expenditure, with R40.14 billion incurred in 2024-25 alone.
The municipalities have disclosed a total of R118.13 billion in unauthorised expenditure, R63.43 billion of which was on non-cash budget items.
The Treasury also said 116 municipalities adopted unfunded budgets and owed interest of R3.40 billion to Eskom and R1.21 billion to water boards in 2024-25.
A total of 48 municipalities had third-party deductions that were overdue for more than one month.
Godongwana had in June put the owed pension funds at R820 million by 18 municipalities, R68.4m owed by six municipalities to the Auditor-General South Africa, and R197.5m debt by eight municipalities to SARS.
“This further demonstrates persistent failure to comply with the legal framework, including the Local Government: Municipal Finance Management Act.”
According to the National Treasury, said municipalities were provided support through the issuance of MFMA Circulars to guide them on what they must do to ensure compliance with specific provisions of the MFMA and its regulations.
“Despite these support interventions, many municipalities are still failing to comply with the provisions of the MFMA and its supporting regulations insofar as they relate to adopting funded budgets, addressing UIFWE and ensuring that statutory commitments are met when due.”
It stated that non-compliance with the legislation was not only a dereliction of fiduciary duties by the political and administrative leadership of municipalities, but threatened the financial sustainability of water boards and Eskom.
The failure to pay third parties negatively impacted the ability of statutory bodies such as the AGSA, SARS, and the Financial Sector Conduct Authority (FSCA) to continue to operate optimally.
The National Treasury added that consistently incurring UIFWE was also indicative of weak governance within municipalities and instances where it is accompanied by financial losses, negatively impacting service delivery.
“National Treasury has found that many municipalities have not processed UIFWE cases through their Municipal Public Account Committees (MPACs), which are responsible for overseeing accountability in some municipalities. This means MPACs are not functioning effectively.”
It stated that some of the affected municipalities have failed to show that consequence management was implemented.
The National Treasury said the transfers will resume once the affected municipalities meet the required conditions and submit proper proof of the conditions being met.
“It is important to note that this is a corrective rather than punitive measure. Because the withholding of the funds will be for a short-term period, the National Treasury does not foresee any impact on service delivery.”