Godongwana withholds July funds to Jhb, 70 municipalities nationwide
Treasury withholds funds from 69 municipalities in nine provinces after the National Treasury announced a temporary suspension of portions of the July 2026 equitable share transfers to municipalities that have persistently failed to comply with financial management legislation. The move affects municipalities across all nine provinces, including the City of Johannesburg, and is aimed at enforcing fiscal discipline, reducing wasteful expenditure and strengthening accountability in local government.
Finance Minister Enoch Godongwana invoked Section 216 of the Constitution following repeated concerns about poor governance, unfunded budgets, escalating municipal debt and failures to comply with the Municipal Finance Management Act (MFMA).
National Treasury acts against persistent financial mismanagement
The National Treasury said the decision was taken after years of engagement with municipalities that continued to breach financial management requirements despite receiving technical support and formal warnings.
According to Treasury, the temporary withholding of funds seeks to:
- Promote sound fiscal discipline.
- Ensure public money is properly managed.
- Reduce unauthorised, irregular, fruitless and wasteful expenditure.
- Hold municipal officials and political office-bearers accountable.
- Improve compliance with the Municipal Finance Management Act.
Treasury emphasised that the intervention is intended to correct financial management failures rather than punish municipalities.
City of Johannesburg among hardest-hit municipalities
The City of Johannesburg is one of the highest-profile municipalities affected by the decision.
The metro had hoped to avoid the withholding after city officials presented revised financial plans intended to satisfy Treasury’s concerns.
Mayor Dada Morero previously expressed confidence that Johannesburg would address Treasury’s objections before the deadline set by Finance Minister Enoch Godongwana.
However, Treasury proceeded with the temporary withholding after determining that sufficient progress had not been demonstrated.
The decision represents another financial setback for South Africa’s largest metropolitan municipality.
Enoch Godongwana previously warned Johannesburg
The latest intervention follows earlier warnings issued by Enoch Godongwana.
In June, the Finance Minister reportedly gave the City of Johannesburg seven days to provide reasons why its equitable share allocations should not be withheld.
The warning followed ongoing concerns regarding:
- Weak financial governance.
- Unfunded municipal budgets.
- Escalating debt.
- Poor revenue collection.
- Unsustainable expenditure.
Although city officials tabled financial recovery plans before council, uncertainty remained regarding whether Treasury received adequate responses within the required timeframe.
Treasury says intervention is corrective
The National Treasury stressed that withholding municipal transfers is a temporary corrective measure.
Officials stated that the action is not intended to reduce service delivery but rather to encourage municipalities to restore financial stability.
Treasury explained that municipalities had received written notice and multiple opportunities to improve their financial positions before funding was temporarily withheld.
Once municipalities demonstrate compliance and provide satisfactory evidence that financial conditions have improved, the withheld transfers may resume.
Why equitable share funding matters
Equitable share funding forms a critical part of municipal finances across South Africa.
These transfers enable municipalities to provide essential services including:
- Water supply.
- Sanitation.
- Electricity distribution.
- Road maintenance.
- Waste collection.
- Community services.
Many municipalities rely heavily on equitable share allocations to maintain daily operations.
Treasury believes that stronger financial management is essential to ensure these public funds are used effectively.
Municipal financial management remains under pressure
The latest intervention highlights ongoing concerns surrounding municipal financial management across South Africa.
Treasury pointed to repeated non-compliance with the Municipal Finance Management Act despite years of guidance, training and oversight.
Financial challenges affecting many municipalities include:
- Poor budget planning.
- Weak revenue collection.
- Rising debt.
- Irregular expenditure.
- Weak internal controls.
- Governance failures.
Officials say improving financial governance remains essential for restoring public confidence.
Auditor-General findings raise alarm
Treasury’s latest decision also reflects concerns raised in the Auditor-General’s 2024/25 local government audit outcomes.
According to Treasury:
- Municipalities have accumulated R24.1 billion in fruitless and wasteful expenditure since 2021.
- Budget credibility has continued to deteriorate.
- Municipalities owe R3.4 billion in interest to Eskom.
- Municipalities owe R1.2 billion in interest to water boards.
These figures illustrate the growing financial pressures facing local government.
Treasury warned that persistent non-payment threatens the financial sustainability of major service providers.
Debt to Eskom and water boards
Municipal debt remains one of the most significant challenges facing local government.
Treasury warned that municipalities failing to settle accounts with Eskom and water boards undermine the financial sustainability of critical infrastructure providers.
Late payments also affect statutory institutions responsible for delivering electricity and water services nationwide.
Government believes improved municipal financial management is necessary to prevent further deterioration.
Municipalities affected across all provinces
The temporary withholding affects municipalities throughout South Africa.
Eastern Cape
Among affected municipalities are:
- Buffalo City.
- Nelson Mandela Bay.
- Makana.
- Sundays River Valley.
- Inxuba Yethemba.
- Port St Johns.
Free State
Municipalities include:
- Mangaung.
- Matjhabeng.
- Maluti-a-Phofung.
- Ngwathe.
- Mafube.
- Letsemeng.
- Tokologo.
Gauteng
Affected municipalities include:
- City of Johannesburg.
- Emfuleni.
- Lesedi.
- Sedibeng District Municipality.
- Merafong City.
- Rand West City.
KwaZulu-Natal
The list includes:
- Newcastle.
- iMpendle.
- uMzinyathi District Municipality.
- AbaQulusi.
- uMkhanyakude District Municipality.
- eMadlangeni.
Limpopo
Treasury identified:
- Mopani District Municipality.
- Musina.
- Thabazimbi.
- Modimolle-Mookgopong.
- Fetakgomo Tubatse.
Mpumalanga
Affected municipalities include:
- Victor Khanye.
- Emakhazeni.
- Nkomazi.
Northern Cape
Municipalities include:
- Kamiesberg.
- Khâi-Ma.
- Ubuntu.
- Emthanjeni.
- Phokwane.
- Magareng.
North West
Among those affected are:
- Madibeng.
- Kgetlengrivier.
- Mafikeng.
- Ditsobotla.
- JB Marks.
- City of Matlosana.
Western Cape
Affected municipalities include:
- Theewaterskloof.
- Laingsburg.
- Beaufort West.
Treasury says service delivery should continue
Although funding has been temporarily withheld, the National Treasury said it does not anticipate immediate disruptions to municipal services.
Officials described the intervention as short-term and indicated that municipalities could regain access to the withheld funds once compliance conditions are met.
Treasury believes municipalities have sufficient opportunities to resolve outstanding financial management concerns.
Moody’s upgrade contrasts with Treasury action
Interestingly, Treasury’s decision came shortly after Moody’s Ratings improved the City of Johannesburg’s outlook to align with South Africa’s national credit rating.
The contrasting developments highlight the complexity of assessing municipal finances.
While external credit agencies may recognise certain improvements, Treasury continues expressing concern over governance, budgeting and compliance with financial legislation.
Why financial discipline matters
Government argues that strong financial management is essential to ensure municipalities can deliver reliable services.
Effective financial controls help municipalities:
- Maintain infrastructure.
- Pay suppliers on time.
- Reduce debt.
- Improve public confidence.
- Deliver sustainable services.
Treasury believes improved governance ultimately benefits residents by protecting public resources.
Conditions for restoring withheld funds
Treasury confirmed that municipalities will regain access to withheld allocations once they:
- Address financial management shortcomings.
- Demonstrate compliance with the MFMA.
- Submit satisfactory evidence supporting corrective measures.
- Improve governance and accountability.
The department said it will continue monitoring progress before releasing the suspended transfers.
Local government under increasing scrutiny
The intervention reflects growing national concern regarding the financial sustainability of municipalities.
Government has repeatedly warned that continued financial mismanagement threatens infrastructure development, service delivery and economic growth.
Stronger oversight measures are expected to remain a priority as municipalities work to improve governance and restore financial stability.
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Conclusion
The decision that Treasury withholds funds from 69 municipalities in nine provinces marks one of the most significant financial interventions affecting local government in recent years. By temporarily suspending portions of equitable share funding, the National Treasury aims to strengthen municipal financial management, enforce compliance with the Municipal Finance Management Act and encourage responsible use of public resources.
With major municipalities including the City of Johannesburg affected, attention will now focus on how quickly local governments respond to Treasury’s conditions. Finance Minister Enoch Godongwana has made it clear that funding will resume only once municipalities demonstrate meaningful improvements in governance, accountability and financial discipline.
References
- National Treasury – Media briefing on the temporary withholding of equitable share transfers to municipalities
National Treasury media briefing - Moneyweb – Godongwana withholds July funds to Johannesburg and over 70 other municipalities
Moneyweb - IOL – Treasury suspends July funding to 69 municipalities over financial mismanagement
IOL - The Witness – Treasury freezes funding for KZN, dozens of municipalities
The Witness
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