Billions of rands in equitable share funding, which the national government allocates to municipalities to help fund basic services, could be released within a month after being temporarily withheld, depending on the speed of municipal compliance.

According to The Witness, the National Treasury intergovernmental relations deputy director-general, Ogalaletseng Gaarekwe, said municipalities had been requested to submit detailed repayment plans outlining how and over what period they intended to settle their outstanding debts.

Gaarekwe was briefing the media this morning (July 8), providing further details on the decision to temporarily withhold the funds.

Her remarks expanded on the reasons contained in the National Treasury’s statement issued yesterday, explaining why the department considered the intervention necessary.

She said although 99 municipalities had initially been identified for possible action, the number was reduced to 69 after the National Treasury assessed the responses received.

“We analysed the responses given by the municipalities and found that some of the amounts were disputed. Municipalities were instructed to pay what they owe during this financial year,” said Gaarekwe.

Intervention is corrective rather than punitive

The National Treasury said the temporary withholding follows persistent and serious non-compliance with the Municipal Finance Management Act 56 of 2003 (MFMA) and its supporting regulations despite years of support through guidance, one-on-one engagements and training interventions.

The department said the intervention is intended to strengthen fiscal discipline; ensure public funds are properly managed; address unauthorised, irregular, fruitless and wasteful expenditure; and hold municipal officials and office-bearers accountable where required by law.

Municipalities were given written notice before the decision and were invited to submit reasons why their funding should not be withheld.

It stressed that the measure is corrective rather than punitive and said it does not expect the short-term withholding of funds to have an immediate impact on service delivery. Equitable share transfers will resume once affected municipalities meet the required conditions and provide proof of compliance.

Parliament welcomes intervention

The Portfolio Committee on Co-operative Governance and Traditional Affairs (CoGTA) yesterday welcomed the National Treasury’s decision to temporarily withhold the July equitable share transfers to 69 municipalities.

The committee noted that equitable share allocations are critical to supporting municipalities in delivering basic services to communities and urged affected municipalities to comply with the National Treasury’s requirements as quickly as possible so that funds can be released without causing further hardship for residents.

Parliament assesses Ngwathe’s progress

According to the Parys Gazette, Parliament’s Portfolio Committee on CoGTA conducted an oversight visit to Ngwathe Local Municipality yesterday (July 7) to evaluate progress since the Free State provincial government intervened under Section 139(1)(c) of the Constitution.

The intervention followed a Bloemfontein High Court ruling, later upheld by the Constitutional Court, which found that Ngwathe had failed to meet its constitutional, legal and administrative obligations to residents.

The courts pointed to widespread governance failures, including debt exceeding R1.5b, deteriorating infrastructure that resulted in repeated sewage spills, prolonged water shortages and persistent financial and administrative mismanagement. The intervention ultimately led to the dissolution of the municipal council and the appointment of an administrator.

During yesterday’s visit, the parliamentary committee engaged political parties represented in the council, business organisations, civil society groups, and representatives of women and youth to determine whether the intervention has improved governance and service delivery. Members also met with the Free State provincial executive to assess progress made since the court ordered the intervention.

Ngwathe is among the 16 Free State municipalities affected.

Local municipalities in the spotlight

According to Newcastle Advertiser, Newcastle Local Municipality is among the seven KZN municipalities affected by the temporary withholding of the funding.

The publication reported that the National Treasury warned that non-compliance with the MFMA not only represents a failure of fiduciary responsibility by municipal political and administrative leadership but also threatens the financial sustainability of bulk suppliers such as Eskom and water boards. It added that failure to pay third parties also affects statutory bodies, including the Auditor-General of South Africa, SARS and the Financial Sector Conduct Authority.

The National Treasury further warned that unpaid service providers often result in additional fruitless and wasteful expenditure through interest charges and penalties, while many municipalities have failed to implement consequence management through disciplinary action, recovery measures or criminal referrals where required.

Vryheid Herald reports that AbaQulusi Local Municipality is also affected. It highlighted the National Treasury’s concerns that some municipalities continue to adopt budgets they cannot afford, fail to investigate financial misconduct or recover losses, and do not implement consequence management against officials responsible for financial irregularities.

According to Mpumalanga News, Victor Khanye, Emakhazeni and Nkomazi local municipalities are the three municipalities in Mpumalanga whose July funding allocations have been withheld.

The publication reported that the National Treasury had provided municipalities with support through MFMA circulars, one-on-one engagements and training interventions before deciding to withhold the funding.

Auditor-General findings support Treasury concerns

National Treasury said the Auditor-General’s 2024/25 Consolidated General Report on Local Government Audit Outcomes largely corroborates the findings published in the 2024/25 MFMA Compliance Report.

The findings include:

• Since 2021/22, municipalities have incurred R24.12b in fruitless and wasteful expenditure.
• Since 2021/22, municipalities and their municipal entities have incurred irregular expenditure of R145.2b, with R40.14b incurred during the 2024/25 financial year alone.
• Since 2021/22, municipalities have disclosed a total of R118.13b in unauthorised expenditure, of which R63.43b (54%) related to non-cash budget items.
• Budget credibility continued to deteriorate, with 116 municipalities (45%) adopting unfunded budgets during the 2024/25 financial year.
• By the end of the 2024/25 financial year, municipalities owed R3.4b in interest to Eskom and R1.21b to water boards.
• A total of 48 municipalities had third-party deductions that were overdue for more than one month.

The National Treasury said the findings demonstrate persistent weaknesses in municipal governance and financial management.

Municipalities affected

The municipalities whose July equitable share allocations have been temporarily withheld are:

Free State (16): Mangaung Metropolitan Municipality, Letsemeng, Kopanong, Mohokare, Xhariep District, Masilonyana, Tokologo, Matjhabeng, Nala, Dihlabeng, Nketoana, Maluti-a-Phofung, Phumelela, Mantsopa, Ngwathe and Mafube.

North West (12): Madibeng, Kgetlengrivier, Tswaing, Mafikeng, Ditsobotla, Ngaka Modiri Molema District, Naledi, Mamusa, Dr Ruth Segomotsi Mompati District, City of Matlosana, Maquassi Hills and JB Marks.

Northern Cape (11): Kamiesberg, Khâi-Ma, Ubuntu, Umsobomvu, Emthanjeni, Renosterberg, Thembelihle, Siyathemba, Kai !Garib, Magareng and Phokwane.

KZN (7): iMpendle, uMzinyathi District, Newcastle, eMadlangeni, Amajuba District, AbaQulusi and uMkhanyakude District.

Eastern Cape (6): Buffalo City Metropolitan Municipality, Nelson Mandela Bay Metropolitan Municipality, Makana, Sundays River Valley, Inxuba Yethemba and Port St Johns.

Gauteng (6): City of Johannesburg Metropolitan Municipality, Emfuleni, Lesedi, Sedibeng District, Merafong City and Rand West City.

Limpopo (5): Mopani District, Musina, Thabazimbi, Modimolle-Mookgopong and Fetakgomo Tubatse.

Mpumalanga (3): Victor Khanye, Emakhazeni and Nkomazi.

Western Cape (3): Theewaterskloof, Laingsburg and Beaufort West.

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