EDITORIAL | Treasury withholding funds to municipalities is a step in the right direction

On Tuesday, National Treasury announced that it is temporarily withholding the July 2026 equitable share transfers to 69 municipalities as part of its efforts to enforce fiscal discipline and improve accountability in the management of public funds.

This affects municipalities in all provinces and includes small and big municipalities, including the City of Johannesburg.

The move by the Treasury is a positive step, as it ensures that municipalities put measures in place to prevent wasteful expenditure and hold those responsible accountable.

The Treasury said the move is intended to instil fiscal discipline and ensure that public money is properly managed. It aims to ensure that unauthorised, irregular, fruitless and wasteful expenditure (UIFWE) is properly addressed.

According to the Treasury, the persistent occurrence of UIFWE is indicative of weak governance within municipalities. Where such expenditure is accompanied by financial losses, it undermines service delivery.

In addition, the failure to pay service providers on time results in further fruitless and wasteful expenditure through interest charges and penalties, while also disrupting essential services.

It makes sense to require municipalities to reduce and eliminate fruitless and wasteful expenditure. The Treasury figures show that since 2021/22, municipalities have incurred R24.12bn in fruitless and wasteful expenditure. During the same period, municipalities and their entities incurred irregular expenditure amounting to R145.21bn, with R40.14bn recorded in 2024/25 alone.

Since 2021/22, municipalities have also disclosed a total of R118.13bn in unauthorised expenditure.

The Treasury’s intervention should encourage municipalities to become fully compliant with the Municipal Finance Management Act. Municipalities are required to adopt funded budgets, address UIFWE and ensure that all statutory obligations are met on time.

Regarding UIFWE, municipalities are required to investigate every case thoroughly. This includes referring cases to municipal public accounts committees, determining accountability, recovering losses from responsible individuals where appropriate, and writing off irrecoverable expenditure only after due investigation.

The South African Municipal Workers’ Union (Samwu), meanwhile, has warned that the practical effect of the Treasury’s decision could push already struggling municipalities closer to collapse, with serious consequences for workers, communities and the delivery of essential public services.

Municipalities are also expected to provide documentary evidence demonstrating that they have met the required compliance conditions. This proof is necessary before National Treasury releases the withheld funds.

The Treasury said the move to withhold payments was a temporary measure aimed at ensuring compliance.

While the South African Local Government Association (Salga) has acknowledged the importance of measures aimed at promoting sound financial management and accountability, it has also pointed out that local government continues to face structural and systemic fiscal challenges that require urgent support and reform.

Salga argues that any withholding of equitable share allocations must strike a balance between enforcing compliance and protecting service delivery and municipal financial sustainability.

It further notes that while non-compliance cannot be condoned, many municipalities are grappling with severe fiscal and economic pressures that undermine both their financial sustainability and their ability to deliver essential services.

The South African Municipal Workers’ Union (Samwu), meanwhile, has warned that the practical effect of the Treasury’s decision could push already struggling municipalities closer to collapse, with serious consequences for workers, communities and the delivery of essential public services.

While these concerns should not be dismissed, municipalities must ultimately be held accountable for the responsible management of public finances.

Fiscal discipline is not optional; it is essential for restoring public confidence and ensuring that taxpayers’ money is spent efficiently and transparently.

With continued support from the Treasury, it is hoped that municipalities will strengthen their financial management, comply fully with their fiduciary responsibilities, and ensure that public funds are used for their intended purpose and to improve the lives of the communities they serve.