Finance Minister Enoch Godongwana has issued the City of Johannesburg (CoJ) with a final notice of its intention to invoke Section 216 of the Constitution to stop the transfer of funds to the metro amid growing liquidity challenges.

This means the country’s head of fiscal policy plans to halt the city’s equitable share allocation for July, after Joburg was among more than 70 municipalities also affected in December.

The latest move by National Treasury, which comes as no surprise, follows repeated warnings about the city’s fragile finances.

Treasury said its decision, read with Section 38 of the Municipal Finance Management Act (MFMA), is necessitated by:

Adoption of an unfunded 2025/26 adjustment budget;
Persistent failure to address unauthorised, irregular, fruitless and wasteful expenditure (UIFWE); and
Failure to implement consequence management in the city.

Stinging rebuke

Godongwana’s reasons were detailed in a letter to Johannesburg Mayor Dada Morero dated 19 June 2026. It is one of a few that Moneyweb has seen where the minister has censured CoJ’s executives over financial mismanagement and poor governance.

In the two-page letter, the minister notes the municipality’s “persistent non-compliance” with Section 65(2)(e) of the MFMA, which requires “that creditors be paid within 30 days on receipt of invoices”.

In addition “Rand Water reports the municipality owes a total of R1.2 billion as of 31 March 2026” and it owes Eskom R3.7 billion.

In its earlier threat to pull the city’s funding, National Treasury wrote to the CoJ on 8 December 2025 requesting the submission of documentation, including quarterly reports, on the implementation of consequence management measures and measures taken to reduce UIFWE.

The municipality reported that its total UIFWE balance decreased from approximately R23.6 billion in 2023/24 to R13.3 billion in 2024/25 – but Treasury said it could not identify any reduction in the 2024/25 UIFWE balance.

“Therefore, our assessment indicates that the municipality has failed to take the steps required to reduce the UIFWE,” Godongwana states in the letter.

The city has seven days from the 19 June letter to provide National Treasury with reasons why it should not go ahead with its intention to stop the transfer of funds to the municipality.

Source: CoJ

Insiders at the CoJ have confirmed to Moneyweb that the mayor is drafting an official response to Treasury, which is expected to be on the minister’s desk by next week.

Moneyweb previously reported that Treasury officials were sceptical of CoJ’s claims that the recently tabled R97 billion budget was indeed funded. The metro is battling a narrowing revenue base, while its projected expenditure continues to climb.

This includes the controversial R10 billion politically facilitated agreement with the South African Municipal Workers’ Union (Samwu), which Treasury wanted struck off the books.

Morero dug in his heels, opting to defy Treasury’s in order to manage what could have become a labour crisis.

At the time, a senior source at National Treasury said: “The consequences of not having a proper budget can go all the way to administration, and nothing is off the table”.

The city has until now avoided being placed under administration.

Make-or-break council sitting

The Joburg city council has made a last-ditch attempt to avoid exclusions to its equitable share allocation for July by tabling a highly anticipated report that could help Treasury hold off on its funding threats.

The council met on Wednesday and Thursday this week to seek approval of a flurry of reports, including a strategy for the prevention and reduction of unauthorised irregular fruitless and wasteful expenditure.

The updated strategy has also taken into consideration the issues of regulatory non-compliance raised by the minister in his letter to the mayor, and National Treasury’s review comments and recommendations on the previous UIFWE reduction strategy.

The four-year strategy covering the financial years from 2024 to 2028 proposes various cumulative targets, including that the 2023/24 balance will have reduced to R9.4 billion in 2025/26 and R6.9 billion in 2026/27.

This will rest on preventative measures put in place to prevent, deter and detect any instances that may result in unauthorised, irregular, fruitless and wasteful expenditure; and expedited investigations to ensure there are consequences.

Source: CoJ

Pie in the sky?

“It’s not just a pie in the sky,” deputy mayor and finance MMC Loyiso Masuku told council on Wednesday.

“We are making significant governance and financial management progress in making sure that we take the city forward,” she claimed.

During the same meeting, the council also tabled a report seeking approval to write-off nearly R880 million of historic irregular expenditure and more than R41 million of unauthorised expenditure, certifying it as irrecoverable and regularised.

These eye-watering figures include irregular and unauthorised expenditures for the various departments in the metro.

The MFMA provides that unauthorised, irregular, or fruitless and wasteful expenditure may be certified as irrecoverable and written off by the council after investigation by a council committee.

The irregular expenditure that the council wants to regularise dates back to the 2010/2011 to 2015/2016 financial years, while the unauthorised expenditure relates to the 2022/2023 and 2023/2024 financial years.

Red-flagged departments

In the documents, seen by Moneyweb, the transport, development planning and group ICT departments are among those with the biggest leakages, with several service providers flagged for contravening legislation.

Bus operator PioTrans was flagged for an amount in excess of R520 million, the highest under the irregular expenditure section.

“The irregularity was due to poor planning and the delay of the appointment,” the report reads.

The committee recommended that the accounting officer “expedite the appointment of the service provider” and “referred the matter to the disciplinary board for further investigation of elements of financial misconduct”.

The same service provider is again flagged for a separate amount of R151 million.

The Auditor-General found that Sizwe Afrika IT Group, as a successful bidder, did not comply fully with the necessary requirements, and that different resources were deployed during contract execution than those initially presented. The service provider was flagged for more than R195 million.

The documents tabled before council this week are likely to form part of the mayor’s response to Godongwana, although it is unclear at this stage if they will be enough to dissuade Treasury from cutting funds allocated to Joburg.

This article was republished from Moneyweb. Read the original here.