National Treasury has warned that national and provincial government departments could soon face the same financial sanctions imposed on municipalities, as it intensifies its campaign against public institutions that fail to pay their bills.
Just days after freezing R13.5-billion in equitable share allocations to 69 municipalities, Treasury on Wednesday revealed that it has already written to government departments and provinces demanding they settle billions of rands owed to municipalities or risk having their own allocations withheld.
The warning marks a dramatic expansion of Treasury’s fiscal crackdown, extending beyond struggling municipalities to the very spheres of government whose unpaid rates and taxes have helped push many councils into financial distress.
Departments placed on notice in February
Speaking during a media briefing, Deputy Director-General for Intergovernmental Relations Okgalaletsweng Gaarekwe said national departments were placed on notice in February.
“What we have done since then with the departments is that national departments received letters in February to say, ‘Pay your accounts or otherwise National Treasury will withhold your funds.’ In April we sent letters to all provinces,” she said.
Gaarekwe said provinces met Treasury’s May deadline by submitting responses, but many remain locked in disputes over outstanding municipal accounts.
“There are a lot of disputed amounts. We are saying to them, on the accounts that you are not disputing, give us a payment plan and it should be reasonable to the extent that it should be paid within this current financial year. It should not be paid over a number of years,” she said.
She revealed that one province proposed settling a R700 million municipal debt over seven years, a proposal Treasury rejected as unrealistic.
The tougher stance comes as Treasury refuses to release R13.5 billion withheld from municipalities until they prove they are serious about restoring financial discipline.
Signed repayment agreements
Gaarekwe said municipalities that adopted unfunded budgets must formally commit never to repeat the practice, while those owing money to Eskom, the South African Revenue Service (SARS), water boards and pension funds must submit signed repayment agreements before portions of the frozen allocations are released.
“What we are requesting from those municipalities is for them to give us the payment plan that has been signed by themselves, together with those creditors. Once they give us that, we will release a portion of the money, which is probably one third,” she said.
“Once they have paid the creditors and they give us proof, we release the money. Essentially it means your money can be withheld for two weeks only. It depends how fast the municipalities act.”
She said the latest intervention mirrors one implemented in December 2025, but lamented that several municipalities failed to honour commitments they made at the time to reduce unauthorised, irregular, fruitless and wasteful expenditure.
“We’ve only withheld R13.5-billion. It will depend on the responsiveness of the municipalities,” she said.
The City of Johannesburg accounts for the biggest share of the frozen allocations, with approximately R3.6 billion withheld, making it one of the municipalities under the greatest financial pressure to satisfy Treasury’s conditions.
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- National Treasury is expanding its financial sanctions from municipalities to national and provincial government departments that fail to pay their municipal bills, threatening to withhold their allocations.
- Treasury has already frozen R13.5 billion in equitable share funding for 69 municipalities and sent letters to national departments in February and provinces in April demanding settlement of outstanding debts.
- Provinces submitted responses by the May deadline, but many disputes over municipal accounts remain unresolved; Treasury demands reasonable payment plans within the current financial year.
- Municipalities must submit signed repayment agreements with creditors like Eskom and SARS to have frozen funds partially released; initial releases will roughly be one-third of withheld amounts.
- The City of Johannesburg faces the largest funding freeze of about R3.6 billion, highlighting significant financial pressure as Treasury emphasizes improving fiscal discipline and accountability.
