South Africa defends withholding funds from 69 municipalities over financial mismanagement

Africa, Economy & Policy

PRETORIA, South Africa (NPA) — South African Finance Minister Enoch Godongwana has defended the government’s decision to withhold the July 2026 equitable share allocations to 69 municipalities, saying the move is aimed at enforcing financial discipline, ensuring compliance with the law and improving service delivery.

Godongwana made the remarks on Friday during a media briefing after the National Treasury announced that the affected municipalities had failed to meet key financial and governance obligations.

According to the Treasury, the municipalities were sanctioned for adopting unfunded budgets, accumulating unauthorised, irregular, fruitless and wasteful expenditure (UIFWE), and failing to meet statutory payment obligations to entities including Eskom, water boards, the South African Revenue Service (SARS), the Auditor-General and pension funds.

“We have been doing it every year, but on a smaller scale. Of this size, we last did it in 2016,” Godongwana said.

“Every year, we are fighting with municipalities. Sometimes we take money from one municipality to another because a municipality is not performing. It is precisely this that will enhance service delivery because we are forcing municipalities to perform.”

The minister explained that the withholding of funds is temporary and that municipalities could regain access to their allocations once they demonstrate credible plans to address the deficiencies identified by the Treasury.

He said municipalities with unfunded budgets would be required to work with Treasury officials to develop sustainable funding plans, while those owing creditors must submit realistic repayment schedules.

For municipalities with high levels of unauthorised, irregular, fruitless and wasteful expenditure, Godongwana said Municipal Public Accounts Committees (MPACs) must review the findings of the Auditor-General, recommend corrective measures and ensure appropriate consequence management.

He disclosed that some municipalities had already complied with Treasury requirements and would have all or part of their equitable share released next week.

The minister stressed that broader government reforms would only succeed if all public institutions embraced accountability and improved performance.

“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 be effective,” he said.

In a statement, the National Treasury described the state of municipal finances as “sobering.”

The Treasury said municipalities had accumulated R24.12 billion in fruitless and wasteful expenditure since the 2021/22 financial year, R145.21 billion in irregular expenditure, including R40.14 billion recorded in 2024/25, and R118.13 billion in unauthorised expenditure.

According to the Treasury, the growing financial mismanagement threatens the sustainability of essential service providers, disrupts basic services and weakens public confidence in local government.

“South Africans deserve municipalities that are financially sound, accountable and capable of delivering services. By invoking the Constitution, we are signalling seriousness about governance, fiscal responsibility and the rule of law,” Godongwana said.