Finance Minister Enoch Godongwana has outlined what National Treasury expects affected municipalities to do in order to have their equitable share transfers reinstated.

Earlier this week, Treasury announced that equitable share transfers to 69 municipalities would be temporarily withheld to instil fiscal discipline, ensure public money is properly managed and to deal with unauthorised, irregular, fruitless and wasteful expenditure by these entities.

Among the targets to be met by the affected municipalities are a 15% reduction in irregular expenditure balances by August and another 15% by September, alongside evidence of funded budgets, functioning disciplinary boards and consequence management.

In a July 10 media briefing, Godongwana said this approach would ensure essential service delivery continues, while municipalities are compelled to correct their financial practices.

Provincial treasuries will monitor compliance and Treasury will continue to provide support through circulars, engagements and training.

In his remarks, Godongwana said that, despite years of support, guidance and training, many municipalities continue to adopt unfunded budgets; accumulate unauthorised, irregular, fruitless and wasteful expenditure; and fail to meet statutory obligations to State-owned Eskom, water boards, the South African Revenue Service (SARS), the Auditor-General and pension funds.

“The numbers are sobering,” he said.

The Minister said that, since 2021/22, municipalities have incurred R24.12-billion in fruitless and wasteful expenditure, noting that they have accumulated R145.21-billion in irregular expenditure, with R40.14-billion in irregular expenditure incurred in 2024/25 alone.

Godongwana said municipalities have disclosed R118.13-billion in unauthorised expenditure, more than half of which was on non-cash budget items.

Additionally, he stated that budget credibility has deteriorated. In 2024/25, 116 municipalities, nearly half, adopted unfunded budgets.

By year-end, he said municipalities owed R3.4-billion in interest to Eskom and R1.21-billion to water boards, while 48 municipalities had overdue third-party deductions.

“This threatens the financial sustainability of bulk suppliers, undermines statutory bodies and disrupts service delivery. Nonpayment of service providers results in penalties, interest charges and service interruptions.

“Weak governance and failure to process unauthorised, irregular, fruitless and wasteful expenditure through Municipal Public Accounts Committees (MPACs) erode accountability and public trust.

“We are fighting to improve governance within municipalities, and with it the quality and consistency of service delivery, as well as to deal with the pernicious culture of nonpayment. Restoring the credibility of public finance, at the local and national level, is a key part of our growth strategy and we cannot turn away from the measures that get us there,” he added.

Godongwana said the affected municipalities had been given sufficient notice in writing and urged to take measures to change their financial management positions ahead of the withholding of funds. They were also given a platform to send, in writing, reasons why their funds should not be withheld.

Prior to the withholding of funds, he said, Treasury had provided support to municipalities through the issuance of Municipal Finance Management Act (MFMA) Circulars which guide municipalities on what they must do to ensure compliance with specific provisions of the MFMA and its regulations; through one-on-one municipal engagements; and various training interventions either directly with the municipalities or through national or provincially facilitated forums.

Despite these support interventions, he said many municipalities are still failing to comply with the provisions of the MFMA and its supporting regulations insofar as they relate to adopting funded budgets, addressing unauthorised, irregular, fruitless and wasteful expenditure and ensuring that statutory commitments are met when due.

“Noncompliance with the legislation is not only a dereliction of fiduciary duties by the political and administrative leadership of municipalities, but it is also threatening the financial sustainability of bulk suppliers [such as water boards and Eskom].”

In addition, Godongwana noted that failure to pay third parties negatively impacts on the ability of statutory bodies to continue operating optimally.

He expressed that consistently incurring unauthorised, irregular, fruitless and wasteful expenditure is also indicative of weak governance within municipalities and instances where it is accompanied by financial losses, negatively impact on service delivery.

In addition, the Minister said nonpayment of service providers results in fruitless and wasteful expenditure owing to interest and penalties charged and service delivery disruptions.

He said some of the affected municipalities had failed to process unauthorised, irregular, fruitless and wasteful expenditure as required under Section 32 of the MFMA, explaining that this section of the Act provides that a municipal council must recover unauthorised, irregular, fruitless and wasteful expenditure from the persons liable therefore, unless, after investigation by a council committee, the expenditure is certified as being irrecoverable and written off.

Godongwana explained that some of the municipalities have failed to properly deal with unauthorised, irregular, fruitless and wasteful expenditure as the MFMA requires municipalities to investigate such expenditure, determine accountability, recover losses where appropriate and take corrective action.

“Treasury has found that many municipalities have not processed unauthorised, irregular, fruitless and wasteful expenditure cases through their MPACs, which are responsible for overseeing accountability in some municipalities.

“This means MPACs are not functioning effectively. In addition, some of the affected municipalities have also failed to show that consequence management is being implemented, including on a timely basis.”

This includes referrals to disciplinary boards, investigations, disciplinary actions, recovery steps and criminal referrals where required. These duties arise under Chapter 15 of the MFMA, read with the Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings.

Godongwana said transfers will resume once municipalities meet the required conditions and submit proof, noting that compliance will be monitored rigorously.

He said municipal councils must process unauthorised, irregular, fruitless and wasteful expenditure through their MPACs, recover losses and implement consequence management. Political and administrative leaders must fulfil their fiduciary duties.

“Treasury will continue to work with municipalities, provincial treasuries, the Department of Cooperative Governance and Traditional Affairs and other cooperative governance structures to strengthen sound financial management.

“This is not a one-off intervention. It is part of a broader effort to restore credibility, accountability, and sustainability in local government.”