National Treasury is planning to withhold the July transfers of the local government equitable share funds to a host of municipalities, including the City of Joburg, for their “persistent failure to adopt budgets and to address irregular, fruitless and wasteful expenditure”.

The municipalities are also being penalised for failing to pay amounts due to water boards, Eskom, the South African Revenue Service, the auditor-general and their respective pension funds.

Treasury will withhold July equitable share funds

Similarly, notices have been issued to provincial and national government departments that owe rates and taxes to municipalities, requiring payment or the loss of their equitable shares from National Treasury.

National Treasury has notified the South African Local Government Association (Salga) of its intention to act against the affected municipalities.

In a confidential letter, Finance Minister Enoch Godongwana told Salga president Bheki Stofile that the department intends to invoke Section 216(2) of the constitution due to the persistent failure of local authorities to adopt funded budgets.

They also failed to address unauthorised, irregular, fruitless and wasteful expenditure and payments to state entities, as well as the handing over of funds to the respective pension funds.

National Treasury is to also invoke Section 65(2)(e) of the Municipal Finance Management Act, which requires that creditors be paid within 30 days of receipt of invoices.

Cities owe R20.7 bn to water boards and R1.4 bn to pension funds

According to the Financial Services Conduct Authority (FSCA) annual report, as of 31 March last year, South African employers owed an estimated R7.29 billion in outstanding pension fund contributions and associated interest.

This figure represents a significant increase from previous years, with the number of non-compliant employers rising to over 15 500.

Instead of improving, the situation is getting worse, with the number almost doubling in 2024 to 7 700 from the 2023 figure.

Despite warnings from the FSCA, municipalities and cleaning and security companies continued to default on payments, prompting the government to crack down on them.

To enforce compliance, National Treasury decided to withhold equitable share transfers to municipalities that defaulted on third-party payments, thereby improving compliance among some delinquent municipalities.

29 municipalities passed unfunded adjustment budgets

A total of 29 municipalities had unfunded adjustment budgets for 2025-26 and are implicated in failing to address unauthorised, irregular, fruitless and wasteful expenditure and, in most cases, in failing to implement consequence management.

A whopping R10 billion is owed to Eskom, R20.7 billion is due to the water boards as at 31 March, and R1.4 billion is owed to pension funds by the municipalities.

Godongwana gave Salga a list of 35 municipalities, with the largest figures from the Free State (18), KwaZulu-Natal (17), North West (16), Northern Cape (13), Eastern Cape (11), Limpopo (7), Gauteng (6), Mpumalanga (6), and the Western Cape (5).

Nelson Mandela Bay and Buffalo City metros top the Eastern Cape 11 defaulters, while Mangaung metro featured prominently among the 18 Free State defaulters.

Joburg is listed alongside Emfuleni, Lesedi, Sedibeng District, Merafong, and Rand West as bad payers.