Treasury warns 35 municipalities, threatens to withhold July equitable share

National Treasury is preparing to withhold July transfers of the local government equitable share from a number of municipalities, including the City of Joburg, over repeated budget and payment failings, according to The Citizen.

What Treasury says

According to The Citizen, the action targets municipalities for their “persistent failure to adopt budgets and to address irregular, fruitless and wasteful expenditure.” The same report says Treasury will also act where municipalities have not settled amounts due to state entities and pension funds.

Legal tools and steps

According to The Citizen, National Treasury has notified the South African Local Government Association (Salga) of its intention to act against the affected municipalities. Finance Minister Enoch Godongwana told Salga president Bheki Stofile in a confidential letter that the department intends to invoke Section 216(2) of the Constitution because of the persistent failure of local authorities to adopt funded budgets, The Citizen reports.

The Citizen also reports that Treasury plans to invoke Section 65(2)(e) of the Municipal Finance Management Act, which requires that creditors be paid within 30 days of receipt of invoices.

Scope of the problem

According to The Citizen, 29 municipalities had unfunded adjustment budgets for 2025-26 and are implicated in failing to address unauthorised, irregular, fruitless and wasteful expenditure and, in many cases, failing to implement consequence management.

The Citizen says municipalities collectively owe large sums to state entities: R10 billion to Eskom, R20.7 billion to water boards (as at 31 March), and R1.4 billion to pension funds.

Who is on the list

According to The Citizen, Finance Minister Godongwana provided Salga with a list of 35 municipalities. The Citizen reports the provincial breakdown as: Free State (18), KwaZulu-Natal (17), North West (16), Northern Cape (13), Eastern Cape (11), Limpopo (7), Gauteng (6), Mpumalanga (6) and Western Cape (5).

The Citizen lists the City of Joburg among municipalities identified as bad payers, alongside Emfuleni, Lesedi, Sedibeng District, Merafong and Rand West.

Notices to other government departments

The Citizen reports that Treasury has also issued notices to provincial and national government departments that owe rates and taxes to municipalities, requiring payment or the loss of their equitable shares from National Treasury.

Investigation and consequences

According to The Citizen, Treasury’s measures are being positioned as enforcement to improve compliance on budget adoption, third-party payments and the management of irregular and wasteful expenditure.