The National Treasury has reversed its decision to withhold the local government’s equitable share from municipalities in an effort to prevent further disruption to basic services as financially distressed municipalities struggle to keep their operations running.
The release of the funds is expected to provide relief to municipalities facing financial pressures and comes as concerns grow over the impact of poor financial management on service delivery.
The National Treasury withheld municipal equitable shares from 69 municipalities for the month of July to enforce fiscal discipline, address unauthorised and wasteful expenditure, and demand accountability for non-compliance with the Municipal Finance Management Act (MFMA).
These municipalities include, among others, the cities of Johannesburg, Nelson Mandela Bay, and Mangaung.
Bid to avoid service delivery disruptions
Finance Minister Enoch Godongwana confirmed that the funds will be fully released by July 31, but emphasised that this was not due to compliance, but to avoid a harsh impact on service delivery.
The same letters will be sent to premiers and Cooperative Governance and Traditional Affairs (COGTA) and finance MECs across the country.
“The decision follows a comprehensive assessment process undertaken, including the active monitoring of compliance by the affected municipalities after National Treasury temporarily withheld transfers,” said Godongwana.
“The equitable share is an important source of funding for basic services, particularly services provided for poor households. National Treasury must therefore balance its constitutional responsibility and enforce financial management requirements with the need to avoid communities carrying the immediate consequences of failure by municipal institutions,” he added.
‘Conditional release’
He said the decision should be noted as a conditional release, as municipalities should continue working on their challenges.
Of the 69 municipalities, he said 20 have already received their full equitable share, while 49 municipalities will receive their outstanding amount on Friday.
“The process from here [means] they are not off the hook. They are going to be required to perform between now and the second trench. Each municipality will receive a letter informing that municipality of the things it is going to do between now and the next trench,” said Godongwana.
Cogta Minister Velenkosini Hlabisa urged municipalities to respond to the National Treasury letters that are to be sent.
He said they have agreed with Godongwana that a similar approach will be used against government departments that owe hefty amounts to municipalities, as they also need to meet their financial obligations.
“We want to urge our municipalities on the question of unfunded budget, these must come to an end. A municipality that adopts an unfunded budget is committing lies to the public because it says, ‘I am going to spend the money I don’t have’.
“These are the things we will be working closely on with Salga (South African Local Government Association) and everyone involved in the system. And we also want to urge the labour sector to be part of this engagement because workers eventually suffer when stringent measures are introduced, as it has happened,” said Hlabisa.
- The National Treasury reversed its decision to withhold equitable share funds from 69 financially distressed municipalities to prevent disruptions to basic services.
- Funds withheld in July aimed to enforce fiscal discipline and address unauthorized and wasteful expenditure under the Municipal Finance Management Act.
- Finance Minister Enoch Godongwana confirmed full release of funds by July 31, emphasizing the move as conditional and aimed at avoiding service delivery impacts, not compliance achievement.
- Municipalities will be required to continue addressing financial challenges and receive letters detailing expectations for ongoing performance before the next funding tranche.
- Cogta Minister Velenkosini Hlabisa called for municipalities to respond to Treasury's letters, urged ending unfunded budgets, and highlighted coordinated efforts with stakeholders including SALGA and labor sectors.
