Three Mpumalanga municipalities hit with funding freeze
The National Treasury has taken a decision to withhold funds from three of Mpumalanga's local municipalities.
The National Treasury is temporarily withholding the July 2026 equitable share transfers to 69 flagged municipalities, including three in Mpumalanga. This action is being taken to instil fiscal discipline and ensure that public money is properly managed, to address unauthorised, irregular, fruitless and wasteful expenditure (UIFWE), and to ensure that municipal officials and office-bearers are held accountable where required by law.
The affected Mpumalanga local municipalities are Victor Khanye, Emakhazeni and Nkomazi.
In a statement issued on Tuesday, July 7, the National Treasury said the decision follows persistent and serious non-compliance with the Municipal Finance Management Act (MFMA) and its supporting regulations.
According to the statement, the municipalities were given sufficient notice in writing and urged to take measures to change their financial management positions before the funds were withheld. They were also given a platform to send, in writing, reasons why the funds should not be withheld.
The temporary withholding of funds is taken in terms of section 216(2) of the Constitution, read with section 38 of the Local Government: Municipal Finance Management Act 56 of 2003. “It is important to note that this is a corrective rather than punitive measure. Because the withholding of the funds will be for a short-term period, the National Treasury does not foresee any impact on service delivery,” the statement read.
Transfers will resume once the affected municipalities can prove that they meet the required conditions.
Process leading to the withholding of funds
The National Treasury said that, prior to the withholding of funds, it provided support to municipalities through the issuance of MFMA circulars, which guide municipalities on how to ensure compliance with specific provisions and regulations. It also conducted one-on-one municipal engagements and various training interventions, either directly with the municipalities or through national or provincially facilitated forums.
Despite these support interventions, many municipalities still failed to comply with the provisions of the MFMA and its supporting regulations, particularly with regard to adopting funded budgets, addressing UIFWE and ensuring that statutory commitments are met when due.
“Non-compliance 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, namely water boards and Eskom,” the treasury stated. “In addition, failure to pay third parties negatively impacts the ability of statutory bodies to continue operating optimally. The statutory bodies referred to are the Auditor-General of South Africa, the South African Revenue Service and the Financial Sector Conduct Authority.”
The department added that the prevalence of UIFWE is indicative of weak governance within municipalities.
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Auditor-General’s 2024/25 report paints a grim picture
The Auditor-General’s 2024/25 Consolidated General Report on Local Government Audit Outcomes largely corroborates the findings published by the National Treasury in the 2024/25 MFMA Compliance Report.
Findings indicate that:
• Since 2021/22, municipalities have incurred a total of R24.12b in fruitless and wasteful expenditure.
• Since 2021/22, municipalities and their municipal entities have incurred irregular expenditure of R145.2b. R40.14b was incurred in 2024/25 alone.
• Since 2021/22, municipalities have disclosed a total of R118.13b in unauthorised expenditure, R63.43b (54%) of which was on non-cash budget items.
• Budget credibility continued to deteriorate. In 2024/25, 116 municipalities (45%) adopted unfunded budgets.
• By the end of the 2024/25 financial year, municipalities owed interest of R3.40b to Eskom and R1.21b to water boards.
• Late payments also extended to payments of contributions and third-party deductions. A total of 48 municipalities had third-party deductions that were overdue for more than one month.
