PRETORIA, South Africa — Finance Minister Enoch Godongwana has declared that South Africans ‘deserve’ financially sound municipalities, defending the government’s decision to withhold July 2026 municipal funding from 69 non-compliant local councils. Speaking to SAnews on the sidelines of a Friday media briefing, the Minister emphasized that the unprecedented suspension of equitable shares is a necessary intervention to enforce fiscal discipline and rescue failing service delivery.
The National Treasury’s drastic measure targets local authorities that have persistently ignored financial regulations. Specifically, the withheld funds are a direct response to municipalities continuing to adopt unfunded budgets and accumulating massive volumes of Unauthorised, Irregular, Fruitless, and Wasteful Expenditure (UIFWE).
Furthermore, the 69 affected councils failed to meet their statutory financial obligations to critical state and corporate entities, including Eskom, regional water boards, the South African Revenue Service (SARS), the Auditor-General, and various pension funds.
A Historic Scale of Intervention
Addressing the severity of the crackdown, Godongwana noted that while the Treasury frequently engages in financial interventions at the local government level, the current scope is historically significant.
“We have been doing it every year but on a smaller scale. Of this size, we’ve last done it in 2016. Every year, we’re fighting with municipalities. Sometimes we take money from one municipality to another, we say to a municipality: you are not performing and we will take your equitable share,” the Minister explained.
He stressed that the ultimate objective of freezing these payouts is corrective rather than purely punitive. “It’s precisely this that will enhance service delivery because we are forcing municipalities to perform. It’s going to improve and enhance,” he added.
The Roadmap to Recovering Withheld Funds
The Finance Minister clarified that the withheld equitable shares are not permanently lost. He outlined a clear, three-step compliance roadmap for municipalities to regain access to their funds, depending on the specific nature of their financial offenses:
- Unfunded Budgets: “Depending on what the offence is. If your offense is that you have an unfunded budget, you’ve got to sit with the Treasury officials and develop steps for transforming that budget in the long term to become a funded budget. Once we have got an agreement…you’ll be off the list,” Godongwana explained.
- Unpaid Creditors: “If you have not paid creditors, we need an indication of a payment schedule where you make a commitment that over time, you are going to pay your relevant creditors.”
- Fruitless and Wasteful Expenditure: “The third offense is…fruitless and wasteful expenditure. The Auditor General has made a decision. At a municipal level…they’ve got MPAC [Municipal Public Accounts Committee]. MPAC sits looks at the decision of the AG and make a recommendation to the council. The council must sit…and say here are the recommendations, we are approving it and there must be consequence management, if necessary,” he detailed.
The strict enforcement has already yielded immediate results. The Minister confirmed that several municipalities have successfully satisfied the Treasury’s compliance requirements and will have their equitable shares, or a portion thereof, released as early as next week.
However, Godongwana warned that structural legislative reforms will ultimately fail without active, willing cooperation from local government leadership. “Reforms must be accompanied by making sure that people are performing. If you have reforms and you don’t have willing partners to participate, the reforms are not going to effective,” he stated.
A “Sobering” Picture of Municipal Debt
The sheer scale of the financial mismanagement that triggered the funding freeze was laid bare in a recent press statement from the National Treasury, which painted a “sobering” picture of local government finances. The data highlights a systemic crisis in municipal money management:
- Fruitless and Wasteful Expenditure: Municipalities have incurred R24.12 billion in losses since the 2021–22 financial year.
- Irregular Expenditure: A staggering R145.21 billion has been accumulated, with R40.14 billion of that incurred in the 2024–25 financial year alone.
- Unauthorised Expenditure: R118.13 billion has been disclosed, with more than half of this amount tied to non-cash budget items.
The Downstream Cost of Non-Compliance
The Treasury warned that this widespread financial negligence has severe downstream effects on the broader economy. It threatens the financial sustainability of bulk infrastructure suppliers, undermines statutory bodies, and directly disrupts essential services to citizens. When service providers go unpaid, it inevitably leads to crippling penalties, compounding interest charges, and severe service interruptions.
Furthermore, the failure to process UIFWE through Municipal Public Accounts Committees continues to erode public trust and accountability at the local level.
Invoking constitutional powers to freeze these funds is a deliberate signal from the government that the era of financial impunity at the local level is ending.
“South Africans deserve municipalities that are financially sound, accountable, and capable of delivering services,” Godongwana concluded. “By invoking the Constitution, we are signalling seriousness about governance, fiscal responsibility, and the rule of law.”