Pretoria, Gauteng — In a stringent move to enforce fiscal discipline and curb financial mismanagement, National Treasury has withheld the July equitable share transfers to 69 municipalities across all nine provinces. The intervention targets local governments grappling with historical unauthorized, irregular, fruitless, and wasteful expenditures, signaling a zero-tolerance approach to poor financial governance in the sector.
The affected municipalities span the entire country and include major metropolitan areas such as the City of Johannesburg, Mangaung, Nelson Mandela Bay, and Buffalo City, alongside smaller rural districts. National Treasury has characterized the withholding of funds as a corrective measure rather than a punitive one. The department noted that it had informed the municipalities in advance, requesting submissions to justify why the funding should not be withheld. The funds will only be released once strict conditions regarding financial management and accountability are met.
To understand the gravity of the withholding, one must look at the nature of the equitable share. Allocated through the Division of Revenue Act (DORA), these transfers are designed to compensate municipalities that lack a strong industrial base or robust revenue-generation capabilities. The funds are crucial for covering operational costs, including salaries, daily maintenance, and subsidies for indigent residents who cannot afford basic services.
Miyelani Holeni, a local governance expert and group chief advisor at Ntiyiso Consulting, described the Treasury’s decision as a drastic but necessary intervention. “National Treasury has always been warning municipalities to clean up their books and ensure good governance,” Holeni explained.
Holeni noted that the impact of the withholding varies depending on the municipality’s location and economic status. Urban metros, like the City of Johannesburg, receive a smaller percentage of their overall budget from the equitable share—estimated to be between R3 billion and R6 billion. However, rural and smaller municipalities rely much more heavily on these transfers to make up for their income deficiencies, meaning they will feel the financial pinch much more acutely.
The expert warned that the move is a “two-edged sword.” While it forces compliance in a highly legislated space, it may prevent municipalities from meeting monthly obligations, such as paying vital suppliers, Eskom, and water boards. This tension was visibly highlighted recently in the Lesedi municipality, where service delivery protests erupted in Ratanda over a R27 million debt owed to Rand Water. The local mayor had previously appealed to Treasury to release the equitable share to settle the debt and restore water services to residents.
However, Holeni cautioned that using the equitable share to plug debt holes should not be a “knee-jerk reaction.” He emphasized that municipalities must improve their own revenue collection and financial planning rather than relying on national bailouts to close gaps in their water and electricity accounts.
Despite the national crackdown, some affected municipalities are pushing back against public alarm. A spokesperson for the Buffalo City Metropolitan Municipality maintained that the intervention is strictly a governance matter rather than a funding crisis. The spokesperson assured residents that the metro is fully cooperating with National Treasury’s requests for additional information.
“We want to assure residents that as a municipality, we are fully cooperating with the National Treasury in its request for additional information for our city to satisfy its requirements,” the spokesperson stated, adding that there is no cause for panic.
Buffalo City maintained that critical services—including road construction and refuse removal—will continue uninterrupted, and that all employees will be paid as the city works to satisfy the Treasury’s requirements. “We have been cooperating with them throughout… we do not believe that it calls for alarm or panic at the moment,” the spokesperson added.
For the 69 municipalities, the coming weeks are critical to securing the release of the withheld allocation for August. According to Holeni, reinstating the transfers requires more than just administrative apologies. Municipalities must thoroughly investigate historical irregular expenditures, trace how they occurred, and implement specific corrective actions. Furthermore, these reports must be processed through municipal public accounts committees. Going forward, Treasury expects to see strict adherence to procurement plans, fewer emergency deviations, and, most importantly, visible improvements in service delivery on the ground.