Treasury Withholds Municipal Funds to Enforce Financial Discipline

According to the National Treasury, the decision follows ongoing non-compliance with the Municipal Finance Management Act (MFMA) despite repeated guidance, training and direct engagement with municipalities.

South Africa's National Treasury has temporarily withheld the July 2026 equitable share transfers to dozens of municipalities across the country, citing persistent failures to comply with financial management laws. The move is intended to strengthen accountability, improve financial discipline and ensure that public funds are managed responsibly. The intervention affects municipalities in all nine provinces, including the metropolitan municipalities of Johannesburg, Buffalo City, Nelson Mandela Bay and Mangaung. Treasury stressed that the measure is temporary and is not expected to disrupt essential public services.

Treasury cites repeated financial management failures

According to the National Treasury, the decision follows ongoing non-compliance with the Municipal Finance Management Act (MFMA) despite repeated guidance, training and direct engagement with municipalities.

The department said many municipalities have failed to adopt funded budgets, address unauthorised, irregular, fruitless and wasteful expenditure (UIFWE), and meet statutory financial obligations on time. Treasury explained that the withholding of funds is a corrective measure taken under Section 216(2) of the Constitution and Section 38 of the MFMA, rather than a punishment.

Before the decision was implemented, affected municipalities were given advance notice and invited to provide reasons why their transfers should not be withheld. Treasury also pointed out that it has supported municipalities through MFMA circulars, one-on-one engagements and training programmes aimed at improving compliance.

Financial mismanagement threatens essential services

Treasury warned that weak financial management at the municipal level has wider consequences for the country's public finances. It said municipalities' failure to settle accounts is placing increasing pressure on Eskom, water boards and statutory institutions such as the Auditor-General of South Africa (AGSA), the South African Revenue Service (SARS) and the Financial Sector Conduct Authority (FSCA).

The department added that poor governance by municipal political and administrative leadership is undermining the financial sustainability of these organisations while affecting their ability to continue delivering essential services.

Treasury also raised concerns about the weak performance of Municipal Public Accounts Committees (MPACs), saying many councils have failed to properly investigate cases of unauthorised, irregular, fruitless and wasteful expenditure or hold responsible officials accountable as required by law.

Audit findings reveal scale of financial problems

The department referred to the Auditor-General's 2024–25 Consolidated General Report on Local Government Audit Outcomes, which highlighted the growing scale of financial mismanagement across municipalities.

Since the 2021–22 financial year, municipalities have recorded R24.12 billion in fruitless and wasteful expenditure, while irregular expenditure has reached R145.21 billion, including R40.14 billion during 2024–25 alone. Municipalities have also disclosed R118.13 billion in unauthorised expenditure over the same period.

Treasury noted that budget planning has continued to deteriorate, with 116 municipalities adopting unfunded budgets during 2024–25, compared with 113 in the previous year. Municipal debt has also increased, with municipalities owing R3.40 billion in interest to Eskom and R1.21 billion to water boards by the end of the financial year. In addition, 48 municipalities had overdue third-party deductions outstanding for more than one month.

The department said the withheld transfers will be released once affected municipalities demonstrate compliance with the required financial conditions and submit satisfactory evidence that corrective measures have been implemented. Treasury added that it will continue working with provincial treasuries and cooperative governance structures to strengthen financial management across local government.