The suspension affects municipalities across all nine provinces, including major metros such as Johannesburg, Mangaung and Nelson Mandela Bay.
The City of Johannesburg is one of the major metros that have been affected by the funding freeze. Picture: iStock
As National Treasury moved to carry out its threat to freeze “equitable share” funds to municipalities with irregular expenditures and massive debts, experts warn that already poor service delivery could get worse in many of these 60 towns and cities.
Independent analyst Goodenough Mashego said the move would affect service delivery and municipalities’ functionality.
Experts warn of service delivery impact
“What the Treasury is doing is a Band-Aid; it’s not going to last because it’s going to affect service delivery. The solution is to empower auditor-general Tsakani Maluleke’s office to recommend charges against the officials in the affected municipality.”
Finance Minister Enoch Godongwana said the municipalities had billions in wasteful expenditure, unpaid debts to Eskom and water boards, and weak oversight has pushed local government finances to breaking point.
Political analyst Sandile Swana said: “Many of these municipalities have been mismanaging these grants and Treasury has been penalising them, to no avail.”
He said National Treasury’s move would compromise the ANC and Joburg mayor Dada Morero in their preparation for the upcoming local government election.
“Big business may ask for the opportunity to run these services under a different regime.”
Treasury targets failing municipalities
The intervention, Treasury said, is corrective, not punitive, but underscores the scale of the municipal finance crisis.
The suspension affects municipalities across all nine provinces, including major metros such as Johannesburg, Mangaung and Nelson Mandela Bay, as well as smaller places like Buffalo City, Beaufort West and Port St Johns.
Councils were given written notice and the opportunity to respond before the decision was taken.
Transfers will resume only once municipalities demonstrate compliance and provide proof of corrective action.
The fallout is crippling municipal finances. Municipalities collectively owe Eskom R3.40 billion in interest and water boards R1.21 billion.
Auditor-general highlights financial failures
Treasury said the auditor-general’s 2024-25 report paints a grim picture:
- R24.12 billion in fruitless expenditure since 2021-22;
- R145.21 billion in irregular expenditure, including R40.14 billion in 2024-25 alone;
- R118.13 billion in unauthorised expenditure, more than half on non-cash budget items;
- 116 municipalities adopted unfunded budgets in 2024-25; and
- 48 municipalities failed to pay third-party deductions on time.
Four North West municipalities have been placed under mandatory provincial intervention with immediate effect, with the provincial Treasury taking over their financial management.
The mandatory interventions in Madibeng, Tswaing, Kgetlengrivier and Naledi Local Municipalities will see a provincial executive representative take over each municipality’s executive and administrative powers.
