By Rebone Tau
South Africans should commend National Treasury for taking a difficult but necessary stand on the financial crisis facing municipalities.
For far too long, the country has watched municipal finances deteriorate while the same problems persist, such as unfunded budgets, growing debt, irregular expenditure, failure to pay creditors, weak revenue collection and a lack of consequence management.
National Treasury recently decided to temporarily withhold funds to affected municipalities until they show progress towards tackling these challenges.
This demonstrates that government is no longer prepared to simply continue transferring public money without demanding accountability.
This is an important development that should not be seen as an attack on local government. Rather, it is an intervention designed to protect municipalities, and National Treasury also indicated in a recent media briefing that it is not a punitive measure.
The approach is corrective, evidence-based and aimed at restoring financial discipline while protecting the delivery of essential services.
The figures facing local government are deeply concerning.
Since the 2021/22 financial year, municipalities have incurred R24.12 billion in fruitless and wasteful expenditure. Irregular expenditure has accumulated to R145.21 billion, with R40.14 billion incurred in 2024/25 alone.
Municipalities have also disclosed R118.13 billion in unauthorised expenditure.
In 2024/25, 116 municipalities, or almost half of all municipalities, adopted unfunded budgets. This cannot continue.
Municipalities cannot adopt budgets that they cannot finance, fail to pay their creditors and accumulate billions in irregular expenditure while expecting the national government to continue providing funding without meaningful corrective action.
National Treasury deserves credit for recognising that the status quo is unsustainable.
What is particularly notable is that this intervention was not sudden. Municipalities were engaged extensively.
The process began in December 2025, with municipalities receiving communication and being given an opportunity to address their financial failures.
When the process began, 99 municipalities were affected.
That number was subsequently reduced to 69. This demonstrates that the objective was not to punish municipalities but to ensure compliance.
Municipalities that met the requirements had their equitable share transfers reinstated. By 16 July, 27 municipalities had received their equitable share. 10 received the full amount withheld, while 17 received partial payments to enable them to pay creditors, including Eskom, water boards, SARS and pension funds.
A further 22 municipalities were expected to receive their equitable share during the week of 20 July.
This is a significant point, as it shows that National Treasury is not withholding funds indefinitely. Instead, it is using the mechanisms available to it to ensure that public funds are managed responsibly.
The four areas identified by National Treasury, namely adopting funded budgets, paying creditors, addressing unauthorised, irregular, fruitless and wasteful expenditure, and implementing consequence management, are entirely reasonable.
These should not be controversial demands. They should be the basic requirements of responsible governance.
The most important aspect of this intervention is perhaps the emphasis on accountability.
For years, South Africa has produced investigation reports, audit findings and forensic reports. Too often, however, the process ends there. Officials are found to have acted improperly, but no meaningful consequences follow.
National Treasury is now demanding evidence that municipalities are taking action, such as conducting investigations, initiating disciplinary processes where necessary and implementing council decisions. This is the kind of accountability that South Africa needs.
However, financial accountability is only part of the broader challenge. Data also needs to be credible to ensure proper allocation of public resources.
For instance, it is important for municipalities to have credible indigent registers. In some municipalities, there is a significant gap between the number of households used in the equitable share formula and the number of households recorded on the municipality’s indigent register.
In one example presented by National Treasury, the equitable share formula was based on 61,615 households, while the municipal indigent register contained only 2,575 households. This raises legitimate questions.
If public money is allocated based on the number of households expected to require support, but the municipality’s own indigent register reflects a significantly lower number, how do we ensure that the funds are reaching the people they are intended to benefit?
The proposed solution is not simply to reduce funding. It is to improve the integrity of the system through credible data and verification.
The proposed approach includes verifying information against national databases, including Home Affairs, SASSA, SARS, CIPC, the Department of Employment and Labour and the Deeds Office.
This is precisely the kind of modern, data-driven governance that South Africa needs. We cannot continue to rely on outdated, incomplete or inaccurate information when billions of rands in public funds are being allocated.
If the data is inaccurate, the allocation may be inaccurate, which means that the people who are supposed to benefit may not receive that benefit.
As South Africa heads to local government elections in November, the National Treasury’s new approach comes at an opportune time and deserves our full support. This will ensure that the 7th administration in local government starts on a stronger governance footing, which can only mean better services for South Africans in the long run.
Rebone Tau is a political commentator and author of The Rise and Fall of the ANCYL. She is a Research Fellow at the Institute for Pan-African Thought & Conversation (IPATC) at the University of Johannesburg. She writes in her personal capacity.
