CAPE TOWN, Western Cape — The constitutional legality and strict financial conditions surrounding the R13.5 billion municipal equitable share freeze are under intense scrutiny following Parliament’s intervention. Dr Zweli Mkhize, Chairperson of the Portfolio Committee on Cooperative Governance and Traditional Affairs (COGTA), has clarified the oversight body’s stance on the funding crisis affecting 69 municipalities, emphasizing that while the National Treasury’s punitive measures were justified, local governments must meet stringent accountability targets to restore their finances.
The parliamentary stance was solidified during a high-level summit held last Friday, which convened the Minister of Finance, the Minister of COGTA, the Financial and Fiscal Commission (FFC), the South African Local Government Association (Salga), and Members of the Executive Council (MECs) from all nine provinces.
According to Dr Mkhize, the primary mandate of the committee was to demand transparency regarding the withheld allocations while ensuring that basic service delivery is not collateral damage in the fight against financial mismanagement. The committee fully endorsed the Treasury’s decision to halt the funds, citing a prolonged history of poor audit outcomes, unfunded budgets, and a severe lack of consequence management.
“The situation of bad financial management and poor audit outcomes has been allowed to drag on for too long. We need at some point to draw a line to say the buck stops here,” Dr Mkhize stated. He noted that municipalities had been failing to pay creditors on time and defaulting on third-party obligations, including crucial payments to provident and pension funds, alongside rampant unauthorized, irregular, and fruitless expenditure.
Addressing the specific scale of the crisis, Dr Mkhize provided an update on the municipalities’ compliance efforts. Initially affecting 99 defaulting municipalities, the number of those with fully withheld equitable shares was brought down to 69, while an additional 42 municipalities have begun resolving their issues after being placed on terms by the Treasury.
However, the aggressive withholding of funds has triggered a complex legal debate regarding its constitutionality. The FFC raised significant concerns over whether freezing the equitable share violates Section 214 of the Constitution, the Division of Revenue formula, and the annually enacted Division of Revenue Act. The core of the argument hinges on the fact that the equitable share is an unconditional grant, unlike conditional grants which can be legally withheld for poor performance.
Acknowledging the weight of this legal query, Dr Mkhize confirmed that Parliament has engaged its internal legal teams to analyze the constitutional parameters. Because the ultimate authority to approve or reject the withholding of these funds rests with the legislature, Parliament is carefully separating the financial accountability issues from the legal mechanisms used by the Treasury to enforce them.
Despite the legal complexities, the committee secured firm commitments from both the Treasury and COGTA that vulnerable communities will be shielded from the financial disruption. A targeted support framework is being deployed to assist non-viable municipalities with poor rate bases that lack the internal capacity to generate adequate revenue or resolve their fiscal deficits independently.
To successfully navigate the freeze and unlock their R13.5 billion in vital funding, municipalities are now subject to strict, measurable conditions. Dr Mkhize detailed that mayors must submit formal written confirmation that they will no longer support or pass unfunded budgets. Furthermore, local authorities are required to demonstrate tangible progress in cleaning up their books by resolving approximately 25% of their unauthorized and irregular expenditure within the next two to three months.
Through these combined measures, Parliament aims to balance the urgent need for fiscal discipline with the constitutional imperative of delivering essential services to the public.
