South Africa's National Treasury will continue to withhold funds from local municipalities that fail to demonstrate financial stability and performance, Finance Minister Enoch Godongwana said on Thursday. This move is part of the government's efforts to crack down on financial mismanagement in municipalities, which has resulted in the failure to pay for essential services such as electricity, water, pensions, and taxes.
In July, the Treasury department temporarily withheld equitable share transfers to 69 municipalities across South Africa, citing years of financial mismanagement and non-compliance with the Municipal Finance Management Act (MFMA). The municipalities, which include major metros such as Johannesburg, Buffalo City, Nelson Mandela Bay, and Mangaung, were given the opportunity to explain why their transfers should not be withheld before the Treasury acted.
The Treasury later relented against 49 of the municipalities, releasing R7.1 billion to ensure that service delivery to residents was not affected. According to Godongwana, Section 216 of the constitution and the MFMA are being used to cut funding to municipalities that fail to perform. "That's still going to continue," he said, emphasizing the government's commitment to ensuring that municipalities operate efficiently and effectively.
Godongwana's comments come as the government pushes for clearer accountability, stronger enforcement, and fiscal sustainability across all spheres of government. The Treasury department recently published proposed amendments to the Public Finance Management Act (PFMA) and the MFMA for public comment. The bill requires municipalities to demonstrate that their budgets are genuinely funded and reinforces revenue collection while protecting basic services for poor households.
The proposed amendments also enhance National Treasury oversight and professional financial management, introducing stronger mechanisms to investigate financial misconduct and recover losses. A clearer framework for financial recovery and intervention in distressed municipalities is also outlined. Godongwana emphasized that it is in the government's interests to have functioning municipalities, particularly given the significant infrastructure spending planned over the next medium-term expenditure framework (MTEF) period.
Public-sector infrastructure spending over the 2026 MTEF period is estimated at R1.07 trillion, with R205 billion allocated to municipalities. If these municipalities are dysfunctional, Godongwana warned that the money would be wasted and not utilized effectively. The government's efforts to support a sustainable turnaround in underperforming municipalities reflect a broader policy shift from oversight to active intervention.
The recent local government elections have brought new leadership to municipalities, and Godongwana stressed that the government will not rest until these municipalities operate efficiently and effectively. With the proposed amendments to the PFMA and MFMA, the government aims to promote fiscal sustainability and accountability across all spheres of government, ensuring that municipalities are able to deliver essential services to residents.
Key points
- The South African Treasury will continue to withhold funds from municipalities that fail to demonstrate financial stability and performance.
- The government has proposed amendments to the Public Finance Management Act and the Municipal Finance Management Act to promote fiscal sustainability and accountability.
- R205 billion is allocated to municipalities over the 2026 medium-term expenditure framework period, highlighting the need for effective and efficient use of funds.
