Collection rates remain under pressure
Municipalities are collecting only 63.9% of billed revenue, raising concerns about their ability to fund basic services and maintain critical infrastructure.
Godongwana warned that poor municipal collections have repercussions throughout the public sector, affecting the financial sustainability of major suppliers such as Eskom and water boards.
Persistent non-payment has become one of the biggest risks facing local government finances and service delivery.
The MTBPS suggests that while national finances are stabilising, municipalities remain a significant fiscal weak spot in the broader public sector.
Treasury cracks down on non-paying municipalities
In June the government took an unprecedented action against municipalities that fail to meet their financial obligations by withholding the equitable share transfers from 69 municipalities. This was due to outstanding debts relating to bulk services, pension contributions, SARS obligations and payments owed to the Auditor-General.
READ: MTBPS | Treasury keeps pressure on municipalities over unpaid bills
By July, 38 municipalities had entered into repayment arrangements, resulting in R4.2 billion being paid to creditors.
Godongwana said the measures are intended to strengthen financial discipline and encourage municipalities to prioritise the settlement of outstanding obligations.
Smart meters emerge as a key solution
A central pillar of government’s recovery strategy is the accelerated rollout of smart and prepaid metering systems aimed at improving billing accuracy and revenue collection.
According to the National Treasury, the Smart Meters Grant Programme has already facilitated the installation of more than 247,200 smart meters across 28 municipalities.
The programme has generated an estimated R361 million in additional municipal revenue while supporting approximately 3,700 installation-related jobs.
Treasury argues that prepaid and smart metering systems are critical for reducing electricity losses, curbing theft and improving payment rates by ensuring consumers pay before consuming services.
Technology expected to improve municipal finances
The technology also provides municipalities with more accurate consumption data and stronger controls over revenue streams.
The MTBPS indicates that future infrastructure and conditional grant allocations will increasingly be linked to measurable improvements in municipal performance, including collection rates, maintenance standards and asset management.
Municipalities that fail to improve may face reduced, withheld or reallocated funding.
The move forms part of a broader effort to ensure that national transfers deliver stronger service-delivery outcomes.
Legislative reforms on the cards
Godongwana also announced that Treasury was also moving to strengthen the legislative framework governing local government finances.
READ: MTBPS | Government links SRD grant to jobs and skills development
Planned amendments to the Municipal Finance Management Act are intended to address chronic weaknesses in financial administration, enable earlier intervention in troubled municipalities and improve accountability for officials and councillors responsible for financial mismanagement.
The reforms are aimed at ensuring municipalities can better manage revenue, maintain infrastructure and meet their obligations to creditors.
- Consumer debt owed to municipalities increased from R427.7 billion in June 2025 to R484.5 billion by June 2026, with collection rates at only 63.9%.
- The government withheld equitable share transfers from 69 municipalities in June due to outstanding debts, leading 38 municipalities to enter repayment arrangements paying R4.2 billion.
- The Smart Meters Grant Programme has installed over 247,200 smart meters in 28 municipalities, generating R361 million in additional revenue and supporting about 3,700 jobs.
- Future infrastructure and conditional grants will be linked to improvements in municipal performance, including collection rates and asset management, with funding potentially reduced or withheld for underperformance.
- Legislative reforms to the Municipal Finance Management Act are planned to improve financial administration, enable earlier intervention, and increase accountability in local government finances.
