SALGA urges payment of municipal debt as Treasury cuts funding

The South African Local Government Association (SALGA) has called on all municipal consumers, including government departments and other organs of state, to settle outstanding municipal accounts, saying municipalities cannot remain financially sustainable without improved revenue collection.

The call follows National Treasury's decision to temporarily withhold the July 2026 Local Government Equitable Share transfers to selected municipalities in terms of Section 216(2) of the Constitution and Section 38 of the Municipal Finance Management Act.

SALGA acknowledged Treasury's efforts to promote sound financial management and accountability but cautioned that enforcement measures alone would not resolve the deep-rooted financial challenges facing municipalities.

In a statement on Tuesday, the association said while compliance with financial regulations is essential, any decision to withhold equitable share funding must also consider its impact on service delivery and municipal finances.

It noted that Treasury had initially identified 99 municipalities for possible withholding of funds but later reduced the number to 69 after municipalities responded to compliance requirements.

SALGA said this demonstrated that municipalities are willing to improve when provided with clear guidance and support.

The association also raised concern over municipalities failing to pay over pension fund contributions, UIF and PAYE deductions already withheld from employees' salaries.

“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,” the association said.

SALGA reiterated its zero-tolerance stance on financial misconduct and called on municipal councils, accounting officers and oversight bodies to investigate irregular expenditure, hold those responsible accountable and recover losses where required by law.

The association said municipalities continue to face mounting financial pressures, including declining revenue collection, weak local economies, rising demand for services, increasing bulk electricity and water costs, ageing infrastructure, distribution losses and growing poverty.

According to SALGA, municipal consumer debt exceeded R480 billion as of 31 March 2026, with government entities and the public among the largest contributors.

It warned that the growing debt burden limits municipalities' ability to pay creditors such as Eskom, water boards, the South African Revenue Service (SARS) and pension funds.

“Municipal sustainability depends on payment for services. Reliable services are not possible when residents, businesses, government departments and other consumers fail to pay municipal accounts,” SALGA said.

SALGA urged all consumers, including organs of state, to settle outstanding municipal debts while calling on municipalities to improve revenue collection, strengthen credit control measures and ensure accurate billing.

“Financial sustainability requires shared commitment from municipalities, consumers and all spheres of government,” SALGA said.

The association further argued that municipal financial distress is being exacerbated by weaknesses in the local government funding framework, including unfunded mandates, fiscal imbalances and the mismatch between Eskom's tariff cycle and municipal financial years, which forces municipalities to absorb higher electricity costs before recovering them through approved tariffs.

SALGA welcomed Treasury's assurance that the withholding of equitable share allocations is intended as a corrective rather than punitive measure and said it would continue assisting affected municipalities to strengthen governance, improve compliance, tighten expenditure controls and implement financial recovery plans.

It added that the situation highlights the need for long-term reforms to the local government funding model, including the ongoing review of the White Paper on Local Government, to build a more financially sustainable and resilient local government system.