Godongwana defends withholding funds from 69 municipalities to enforce accountability

Finance Minister Enoch Godongwana has defended government's decision to withhold July 2026 equitable share allocations from 69 municipalities, saying the move is aimed at enforcing compliance with financial regulations and improving service delivery.

Speaking during a media briefing on Friday, Godongwana said the decision follows continued failures by several municipalities to meet key financial and governance obligations.

These include adopting unfunded budgets, accumulating unauthorised, irregular, fruitless and wasteful expenditure, and failing to settle debts owed to Eskom, water boards, the South African Revenue Service (SARS), the Auditor-General and pension funds.

Godongwana said government has used similar measures in previous years, although on a much smaller scale.

"We have been doing it every year, but on a smaller scale. The last time we took action on this scale was in 2016. Every year we are fighting with municipalities. Sometimes we take money from one municipality and say, 'You are not performing and we will take your equitable share.' It is precisely this that will enhance service delivery because we are forcing municipalities to perform," he said.

The Minister explained that municipalities can regain access to their withheld funds by addressing the specific areas of non-compliance. Municipalities with unfunded budgets must work with National Treasury to develop credible plans to restore financial sustainability, while those that have failed to pay creditors must submit repayment schedules demonstrating how outstanding debts will be settled.

He added that municipalities flagged for unauthorised, irregular, fruitless and wasteful expenditure must process the findings through their Municipal Public Accounts Committees (MPACs), with councils expected to adopt the recommendations and implement consequence management where necessary.

According to Godongwana, some municipalities have already met Treasury's requirements and will receive all or part of their equitable share allocations as early as next week.

He stressed that government reforms can only succeed if institutions are willing to implement them.

"Reforms must be accompanied by making sure that people are performing. If you have reforms and you don't have willing partners to participate, the reforms are not going to be effective," he said.

In a statement, National Treasury described the state of municipal finances as concerning. Since the 2021/22 financial year, municipalities have accumulated R24.12 billion in fruitless and wasteful expenditure, R145.21 billion in irregular expenditure — including R40.14 billion recorded in the 2024/25 financial year — and R118.13 billion in unauthorised expenditure, more than half of which relates to non-cash budget items.

Treasury warned that persistent non-payment of creditors threatens the financial sustainability of bulk service providers, weakens statutory institutions and disrupts the delivery of essential services. It also said poor governance and the failure to process financial misconduct through MPACs continue to undermine accountability and erode public confidence in local government.

Godongwana said South Africans deserve municipalities that are financially sustainable, accountable and capable of delivering quality services, adding that the decision to invoke constitutional measures sends a clear message that government is serious about strengthening governance, fiscal responsibility and the rule of law.