National Treasury has warned that it will continue enforcing compliance and accountability measures against municipalities that fail to meet their financial obligations, after withholding equitable share transfers from 69 municipalities over the mismanagement of public funds.
The intervention targeted municipalities that failed to pay creditors, including bulk utility providers, the South African Revenue Service, the Auditor-General of South Africa and pension funds.
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Tightening the accountability screws
Finance Minister Enoch Godongwana said the current financial year should bring a visible reduction in unauthorised, irregular, fruitless and wasteful expenditure as government tightens its oversight of municipal finances.
“The failures by the municipalities included non-payment of bulk utility providers, the South African Revenue Service and the Auditor General of South Africa, as well as of pension fund contributions,” the Medium-Term Budget Policy Statement (MTBPS) states.
Government required the affected municipalities to negotiate payment plans with their creditors and take disciplinary action against those responsible for unauthorised, irregular, fruitless and wasteful expenditure.
The intervention appears to have prompted some municipalities to settle their outstanding debts as the MTBPS revealed that at least R4.2-billion had been paid to creditors by the end of July by 38 municipalities.
Municipal debt burden remains
However, municipal finances remain under pressure, with local governments also pointing to money owed to them by other public institutions. As at December 31 2025, municipalities reported that public bodies owed them R27.6-billion, more than half of which was owed by provincial government departments.
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The outstanding amounts add to the financial pressure on municipalities, which must maintain infrastructure and provide services while meeting their own payment obligations.
Treasury said government was working on interventions to ensure that municipalities received money owed to them by other public institutions. One of the measures is the municipal debt-relief programme, which aims to prevent municipalities from accumulating unpaid electricity bills to Eskom.
Debt relief linked to stricter conditions
The programme attaches strict conditions to debt relief, requiring municipalities to improve financial management and ensure that electricity revenue is used to meet their obligations. Municipalities that cannot operate their electricity distribution networks sustainably are expected to enter into distribution agency agreements with Eskom.
Under these agreements, Eskom takes responsibility for operational management, maintenance and billing of electricity distribution on behalf of the municipality.
The arrangements are intended to protect municipal revenue by ring-fencing electricity collections to pay bulk electricity bills and fund network maintenance, with any surplus returned to the municipal budget.
Treasury’s approach reflects the pressure on local government to improve financial discipline, pay creditors and ensure that money collected from residents is used to sustain essential services.
The continued enforcement of compliance measures signals that municipalities will be expected to demonstrate tangible improvements in financial management rather than allow unpaid bills and irregular expenditure to accumulate.
- National Treasury withheld equitable share transfers from 69 municipalities due to mismanagement of public funds and non-payment of creditors.
- Finance Minister Enoch Godongwana emphasized reducing unauthorised, irregular, fruitless, and wasteful expenditure in the current financial year.
- By the end of July, 38 municipalities had paid at least R4.2 billion to creditors after government intervention.
- Municipalities reported public bodies owed them R27.6 billion as of December 31, 2025, with more than half owed by provincial government departments.
- The municipal debt-relief programme requires stricter financial management and may involve Eskom taking over electricity distribution operations for unsustainable municipalities.
