Treasury defends decision to withhold R13.5bn from municipalities
· Citizen
National Treasury has defended its decision to withhold R13.5 billion, of which the City of Johannesburg owes R3.6 billion in equitable share transfers from municipalities.
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National Treasury froze July 2026 equitable share transfers to 60 municipalities across South Africa, citing persistent financial mismanagement and staggering levels of unauthorised, irregular, fruitless and wasteful expenditure (UIFWE).
Suspension
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 towns 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.
Commitment
Speaking at a briefing on Wednesday, Intergovernmental Relations Deputy Director-General, Ogalaletseng Gaarekwe, explained that municipalities with unfunded budgets were required to commit to ending the practice.
“What we expected was for municipalities to say, ‘we commit from now on, we will not table unfunded budgets moving forward, whether it’s an adjustment, whether it’s the main budget It was just a commitment we needed in that case,” she said.
Payment plans
Gaarekwe said Treasury also demanded signed payment plans from municipalities owing billions to creditors, including Eskom, water boards, SARS, and pension funds.
“Once municipalities submit proof of agreements and partial payments, withheld transfers will be released. It means funds could be withheld for only two weeks, depending on how fast the municipality acts,” Gaarekwe noted.
The crackdown extends to unauthorised, irregular, fruitless and wasteful expenditure.
Pledges
Gaarekwe said municipalities had pledged to reduce UIFWE by set percentages between January and June 2026, but many failed to honour commitments.
“So, they had made commitments, and some of them, the reason why the number has reduced to 69 because we have the withheld for 69, is that some did not honour the commitments they made during that time with regards to this unauthorised, irregular, fruitless, and wasteful expenditure.”
Joburg owes billions
Gaarekwe confirmed that Johannesburg alone had R3.6 billion withheld. Nationally, the withheld amount represents a fraction of the R110 billion equitable share for the new financial year.
She stressed that service delivery should not be disrupted, as municipalities raise the bulk of their funding from their own revenue.
“Learning from the experience of last year, because even last year, this time, we withheld the funds for a number of municipalities, so this time we withheld for 75. But I can assure you that by early August, we had already released the money for everyone,” she said.
“So, it depends on how fast the municipalities sort out the payment plans, send us those payment plans, and release the major portion of those funds to them.
“Once we release a portion, they go straight and pay that particular pension fund and the auditor general, and once they have done that, we release the whole amount for them to continue.
“We are not expecting this to impact service delivery,” Gaarekwe said
Disputes
Treasury has also written to national departments and provinces, warning that failure to pay creditors will trigger similar action.
Provinces were required to respond by 29 May with payment plans deemed “reasonable” and executable within the current financial year.
Plans stretching over several years were rejected. Disputed amounts must be resolved within three months.
Intervention to avoid collapse
The Treasury Deputy Director‑General added that the intervention had already prevented two water boards from collapsing.
“If a water board cannot provide services, communities won’t get water. This process has helped to keep them operational,” he said.
Treasury linked the measures to findings by the Auditor‑General, who has repeatedly flagged unfunded budgets and escalating UIFWE.
“A funded budget is a legal requirement. Many councils adopt budgets without sufficient cash to back expenditure. Our role is to enforce compliance and guide municipalities upfront,” the DDG explained.
Consequence management
Treasury emphasised that consequence management lies with municipal councils, not Treasury.
It said oversight structures must hold officials accountable, while the Treasury enforces compliance through financial controls.
Treasury says consequence management is being implemented against non‑compliant municipalities, following the reduction of funding linked to expenditure issues.