Treasury Defends Withholding Funds From 69 Municipalities

Godongwana explained that municipalities have a clear path to securing the release of their equitable share allocations.

Finance Minister Enoch Godongwana has defended the decision to temporarily withhold the July 2026 equitable share allocations from 69 municipalities, saying the move is necessary to enforce financial discipline and improve public service delivery across South Africa. Speaking on the sidelines of a media briefing, Godongwana said the National Treasury has previously withheld municipal allocations on a smaller scale, though the current intervention is the largest since 2016. He stressed that the measure is intended to encourage municipalities to comply with financial regulations rather than serve as a punishment.

According to the Treasury, the affected municipalities repeatedly failed to meet key legal and financial obligations, including adopting unfunded budgets, allowing unauthorised, irregular, fruitless and wasteful expenditure to grow, and failing to pay institutions such as Eskom, water boards, the South African Revenue Service, the Auditor-General and pension funds.

Municipalities can regain funding by meeting Treasury conditions

Godongwana explained that municipalities have a clear path to securing the release of their equitable share allocations. Those with unfunded budgets must work with Treasury officials to develop credible long-term financial recovery plans that will place their budgets on a sustainable footing. Municipalities that have fallen behind on payments to creditors are required to submit realistic repayment schedules showing how outstanding debts will be settled over time. In cases involving fruitless, wasteful or irregular expenditure, Municipal Public Accounts Committees must consider the Auditor-General's findings and recommend appropriate action to municipal councils, including consequence management where necessary. The minister confirmed that some municipalities have already met Treasury's requirements and are expected to receive all or part of their withheld allocations as early as next week.

Treasury highlights growing financial risks

The National Treasury described the financial position of many municipalities as deeply concerning. Since the 2021–22 financial year, municipalities have accumulated R24.12 billion in fruitless and wasteful expenditure, R145.21 billion in irregular expenditure, including R40.14 billion during 2024–25, and R118.13 billion in unauthorised expenditure, with more than half linked to non-cash budget items.

Treasury warned that poor financial management threatens the sustainability of bulk service providers, weakens statutory institutions and disrupts essential public services. Unpaid service providers often face delayed payments, penalties and interest charges, creating additional pressure on municipal finances.

Godongwana said meaningful government reforms depend on capable institutions and responsible leadership. He added that strengthening accountability, enforcing the rule of law and improving financial governance are essential if municipalities are to deliver reliable services and restore public confidence.