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The National Treasury is temporarily withholding July 2026 equitable share transfers to 69 municipalities as part of its efforts to enforce fiscal discipline and improve accountability in the management of public funds.
It said the decision follows persistent noncompliance with the Local Government: Municipal Finance Management Act (MFMA) and its supporting regulations, despite support from the National Treasury through guidance, municipal engagements and training.
The Treasury said in a statement on Tuesday that the move was meant to instil fiscal discipline and ensure public money was properly managed. It wants to ensure unauthorised, irregular, fruitless and wasteful expenditure are addressed.
The withhold spans all provinces and includes major municipalities such as Johannesburg, Nelson Mandela Bay, Mangaung, Emfuleni, Newcastle, Mopani district municipality, Buffalo City, Beaufort West and Matlosana.
The Treasury said the municipalities had been given written notice and an opportunity to provide in writing their reasons why their funds should not be withheld.
The temporary withholding of funds is implemented in terms of section 216(2) of the constitution, read with section 38 of the Local Government: Municipal Finance Management Act.
The Treasury said because the withholding of funds would be short-term, it did not foresee any impact on service delivery.
It said that, despite sustained support, many municipalities continued to fail to adopt funded budgets, investigate unauthorised, irregular, fruitless and wasteful expenditure, settle statutory financial obligations and implement consequence management where financial misconduct has occurred.
“Noncompliance with the legislation is not only a dereliction of fiduciary duties by the political and administrative leadership of municipalities but it is also threatening the financial sustainability of bulk suppliers (water boards and Eskom).”
It said failure to pay third parties affected the ability of statutory bodies such as the auditor-general, Sars and The Financial Sector Conduct Authority.
Treasury said several municipalities have failed to process unauthorised, irregular, fruitless and wasteful expenditure cases through their municipal public accounts committees, as required by the MFMA.
In many instances, investigations have not been concluded, responsible officials have not been held accountable and financial losses have not been recovered.
The department raised concerns about the lack of consequence management, saying municipalities have failed to institute disciplinary proceedings, recover losses or refer matters for criminal investigation where required under the MFMA.
The Treasury’s findings are supported by the auditor-general’s 2024/25 consolidated general report on local government audit outcomes, which highlights continued weaknesses in municipal financial management.
The report found that municipalities have incurred R24.12bn in fruitless and wasteful expenditure since the 2021/22 financial year, while irregular expenditure has reached R145.21bn in the same period.
Municipalities also disclosed R118.13bn in unauthorised expenditure, and 116 municipalities adopted unfunded budgets during the 2024/25 financial year.
By year end, municipalities owed R3.40bn in interest to Eskom and R1.21bn to water boards, while 48 municipalities had overdue third-party deductions outstanding for more than a month.
The Treasury said the suspended transfers would be released once affected municipalities met the required conditions.
TimesLIVE
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