Pretoria: National Treasury is temporarily withholding the July 2026 equitable share transfers to dozens of South African municipalities to instil strict fiscal discipline and root out financial misconduct. The intervention follows what the department described as 'persistent and serious non-compliance' with the Municipal Finance Management Act (MFMA).
According to South African Government News Agency, National Treasury announced that the decision to withhold funds is aimed at ensuring that public money is properly managed and that unauthorized, irregular, fruitless, and wasteful expenditure is addressed. The initiative is also intended to hold municipal officials and office-bearers accountable as required by law. The municipalities affected span across the country's nine provinces, including metro municipalities City of Johannesburg, Buffalo City, Nelson Mandela Bay, and Mangaung.
The withholding of funds is conducted under section 216(2) of the Constitution and section 38 of the Local Government: Municipal Finance Management Act 56 of 2003 (MFMA). Treasury emphasized that this measure is corrective rather than punitive, and because the withholding is temporary, it is not expected to impact service delivery.
National Treasury highlighted that affected municipalities were forewarned and provided with guidance and support to ensure compliance with MFMA provisions. Despite these efforts, many municipalities have continued to fail in adopting funded budgets and addressing unauthorized expenditures, making the withholding of funds necessary.
The department also warned of broader economic consequences, noting that mismanagement at the municipal level destabilizes critical national entities and bulk utility providers like water boards and Eskom. Non-compliance also affects statutory bodies such as the Auditor-General of South Africa, the South African Revenue Services, and the Financial Sector Conduct Authority.
Issues with consequence management were also noted, with many Municipal Public Accounts Committees failing to function effectively or implement necessary corrective actions. The Auditor-General's 2024/25 report highlighted significant financial mismanagement, including R24.12 billion in fruitless and wasteful expenditure since 2021-22, and irregular and unauthorized expenditures amounting to over R145 billion and R118 billion, respectively.
The statement concluded with assurances that transfers will resume once municipalities meet required conditions and provide proof of compliance. National Treasury will continue collaborating with municipalities, provincial treasuries, and governance structures to strengthen financial management.