SALGA: Treasury freeze on 69 municipalities must not impair service delivery

The South African Local Government Association (SALGA) has urged that National Treasury’s temporary withholding of July equitable share allocations to 69 municipalities must not undermine essential services or municipal financial sustainability.

What Treasury did and why

National Treasury said it temporarily withheld the July 2026 Local Government Equitable Share allocations to 69 municipalities across all nine provinces to enforce fiscal discipline, address financial mismanagement and ensure accountability following persistent non-compliance with the Municipal Finance Management Act and its regulations.

Treasury said affected municipalities were given written notice and an opportunity to provide reasons why their allocations should not be withheld. The department described the measure as corrective rather than punitive and said the temporary withholding was not expected to affect service delivery.

SALGA’s response and concerns

SALGA spokesperson Motalatale Modiba welcomed efforts to strengthen governance, financial discipline and accountability but warned that many municipalities face structural and systemic fiscal challenges that require urgent support and reform.

Any withholding of equitable share must balance compliance objectives with the impact on service delivery and municipal financial sustainability. It is also important to distinguish genuine governance failures from deeper structural challenges.

SALGA highlighted that Treasury initially intended to withhold transfers from 99 non-compliant municipalities, but that number was reduced to 69 after engagements with affected municipalities. Modiba said the reduction demonstrated the value of proactive engagement and that municipalities were willing to act when given clear requirements and support.

Financial mismanagement and specific risks

SALGA raised concerns that some reasons cited by Treasury for withholding allocations included municipalities failing to pay pension fund contributions, UIF and PAYE deductions that had already been withheld from employees’ salaries. The association said such funds do not belong to municipalities and must never be used for other purposes.

These funds do not belong to municipalities and must never be used for other purposes. Such conduct undermines employee rights, public trust, and exposes municipalities to financial and legal risk.

Modiba reiterated SALGA’s position of zero tolerance for financial misconduct, persistent non-compliance and failures in consequence management. He said councils, accounting officers and oversight structures must investigate irregular expenditure, hold those responsible accountable and recover losses as required by law.

Broader fiscal pressures facing municipalities

SALGA said municipal financial distress is also driven by declining revenue collection, weak local economies, rising service demand, increasing bulk electricity and water costs, ageing infrastructure, distribution losses and growing poverty.

The association noted that municipal consumer debt had exceeded R480 billion as at March 31, 2026, with government entities and members of the public among the biggest contributors. SALGA said the growing debt burden weakened municipalities’ ability to meet obligations to Eskom, water boards, pension funds, SARS and other creditors.

Modiba stressed that municipal sustainability depends on payment for services and called on all consumers, including organs of state, to settle outstanding municipal debts. He also urged municipalities to strengthen revenue collection, credit control and billing accuracy.

Looking ahead

SALGA said enforcement measures alone will not resolve municipal financial distress and that long-term solutions are required to address debt, unfunded mandates, fiscal imbalances, infrastructure backlogs and revenue constraints, particularly in rural and economically vulnerable communities.

The association welcomed Treasury’s indication that withheld allocations could be released once municipalities met required conditions and said it would continue supporting affected municipalities to improve recovery plans, governance, compliance, expenditure controls and financial sustainability.

SALGA remains committed to working with National Treasury, the Auditor-General, COGTA, provincial governments and municipalities to implement immediate corrective measures and long-term structural reforms.