TREASURY FREEZES EQUITABLE SHARE TRANSFERS TO 69 NON-COMPLIANT MUNICIPALITIES
PRETORIA – In an extraordinary intervention to curb widespread financial misconduct, Finance Minister Enoch Godongwana has announced National Treasury’s decision to temporarily withhold the July 2026 local government equitable share transfers from 69 municipalities across South Africa.
The drastic corrective measure, invoked under Section 216(2) of the Constitution and the Municipal Finance Management Act (MFMA), affects major metropolitan areas—including the City of Johannesburg, Nelson Mandela Bay, Buffalo City, and Mangaung—as well as dozens of local and district municipalities across all nine provinces.
According to Minister Godongwana, the intervention is designed to enforce fiscal discipline, protect public funds, and compel failing local governments to align with statutory regulations.
A Multibillion-Rand Crisis in Local Governance
The intervention follows years of state-sponsored support, training, and legislative warnings that have failed to stem severe financial decline. Treasury’s data reveals staggering systemic deficits across the local government sector:
R145.21 billion in accumulated irregular expenditure, with R40.14 billion incurred during the 2024–25 financial year alone.
R24.12 billion lost to fruitless and wasteful expenditure since the 2021–22 cycle.
R118.13 billion in disclosed unauthorized expenditure.
Widespread Budget Failure: In 2024–25, nearly half of the country’s municipalities (116) adopted completely unfunded budgets.
Beyond internal audit failures, the 69 targeted municipalities collectively owe critical utilities and statutory bodies R27.4 billion.
This includes outstanding interest debts of R3.40 billion to Eskom and R1.21 billion to various water boards, alongside widespread failures to hand over paydeductions for employee pensions, the South African Revenue Service (SARS), and the Auditor-General (AGSA).
"This fragility is not solely the result of external socio-economic pressures," Minister Godongwana emphasized. "A significant portion relates to the internal organization of municipal finance itself. Many councils continue to adopt unfunded budgets, fail to process unauthorized, irregular, fruitless, and wasteful expenditure (UIFWE) through their committees, and neglect consequence management."
How the Funding Freeze Will Work
National Treasury has clarified that this funding halt is a structured corrective action rather than a permanent sanction.
To safeguard critical national utilities and employee livelihoods, Treasury will bypass non-compliant municipal accounts, redirecting crucial cash injections in direct tranches to Eskom, municipal water boards, and statutory bodies to protect electricity, water networks, and worker pensions.
Affected municipalities were issued written warnings ahead of the freeze and provided an opportunity to present representations.
Strict Compliance Targets for Reinstatement
To unlock their frozen equitable share allocations, the 69 municipalities must meet stringent financial recovery benchmarks overseen by National Treasury and provincial counterparts:
UIFWE Reduction: Municipalities must hit a 15% reduction in their irregular expenditure balances by August, and an additional 15% drop by September.
Accountability Measures: Councils must supply evidence of functional disciplinary boards, active processing of historical financial misconduct through Municipal Public Accounts Committees (MPACs), and implemented consequence management.
Credible Planning: Municipal leadership must provide concrete proof of fully funded seasonal budgets and sign strict debt repayment schedules with third-party creditors.
"South Africans deserve municipalities that are financially sound, accountable, and capable of delivering services," Godongwana concluded. "By invoking the Constitution, we are signaling seriousness about governance, fiscal responsibility, and the rule of law."
Official List of Affected Municipalities
Eastern Cape: Buffalo City, Nelson Mandela Bay, Makana, Sundays River Valley, Inxuba Yethemba, Port St Johns.
Free State: Mangaung, Letsemeng, Kopanong, Mohokare, Xhariep District, Masilonyana, Tokologo, Matjhabeng, Nala, Dihlabeng, Nketoana, Maluti-a-Phofung, Phumelela, Mantsopa, Ngwathe, Mafube.
Gauteng: City of Johannesburg, Emfuleni, Lesedi, Sedibeng District, Merafong City, Rand West City.
KwaZulu-Natal: iMpendle, uMzinyathi District, Newcastle, eMadlangeni, Amajuba District, AbaQulusi, uMkhanyakude District.
Limpopo: Mopani District, Musina, Thabazimbi, Modimolle-Mookgopong, Fetakgomo Tubatse.
Mpumalanga: Victor Khanye, Emakhazeni, Nkomazi.
Northern Cape: Kamiesberg, Khâi-Ma, Ubuntu, Umsobomvu, Emthanjeni, Renosterberg, Thembelihle, Siyathemba, !Kai !Garib, Magareng, Phokwane.
North West: Madibeng, Kgetlengrivier, Tswaing, Mafikeng, Ditsobotla, Ngaka Modiri Molema District, Naledi, Mamusa, Dr Ruth Segomotsi Mompati District, City of Matlosana, Maquassi Hills, JB Marks.
Western Cape: Theewaterskloof, Laingsburg, Beaufort West.
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