Finance Minister Enoch Godongwana reports that letters have been written to national departments and provinces warning them that their September equitable-share transfers could be withheld should they fail to settle outstanding payments to municipalities.

The Minister put national and provincial government on notice during a briefing held to announce that the National Treasury will begin releasing the local government equitable share transfers not yet transferred on July 31.

This, despite the fact that not all of the 69 municipalities affected by the decision to withhold the transfers had complied with the requirements set for the release of the funds.

The move to withhold the July transfers – the first of three distributed yearly to local governments, with the other payments made in December and March – was announced in early July and was taken in terms of Section 216(2) of the Constitution, read with Section 38 of the Local Government: Municipal Finance Management Act 56 of 2003.

It followed the failure of these 69 municipalities to respond to letters sent to 99 municipal mayors on June 22 requesting evidence that they were moving to adhere to the requirements of the Municipal Finance Management Act.

It specifically sought evidence demonstrating that municipalities were not passing unfunded budgets, were paying bulk suppliers, including water boards and Eskom, were tackling ongoing unauthorised, irregular, and fruitless and wasteful expenditure, and were implementing consequence management.

On July 3, letters were emailed to 69 mayors indicating that the Minister had decided to temporarily withhold the transfer of the July funding.

During a subsequent Parliamentary briefing, at which the Financial and Fiscal Commission (FFC) raised concerns about the legality of the move, the question of equitable-share transfers to national departments and provinces that owed municipalities was raised by several participants.

The FFC noted that, while the 69 affected municipalities owed R97.4-billion to creditors, they were also owed R217.9-billion, including by other organs of State, which owed them R11.6-billion.

During a July 28 briefing, Godongwana indicated that the National Treasury was preparing to invoke Section 216(2) of the Constitution against those national departments and provinces that were failing to meet their obligation to pay municipalities within 30 days.

He reported that letters had been circulated to national and provincial government indicating that their September equitable share transfers could be withheld unless the debt was settled.

The reason it had not taken place earlier was attributed to the fact that the financial year for municipalities was different from the April to end-March financial year under which national and provincial government operated.

“Once we finalise all of these performance indicators we want from municipalities, we are going to go to everybody else.

“The Public Finance Management Act requires that we pay service providers within 30 days [and] we are working on that programme,” he said, indicating that an age analysis of some departmental invoices was already under way.

CONDITIONAL RELEASE

Meanwhile, he reported that 20 municipalities had already received their full July equitable shares, having met the criteria.

The other 49 municipalities would receive their outstanding equitable shares on Friday, July 31, 2026, of which 21 municipalities had already received partial allocations.

A total of 28 municipalities would receive their allocations despite not fully complying to date.

Godongwana justified the decision to release all the funds on grounds that this would “avoid having an adverse short- to medium-term effect on the delivery of basic municipal services”.

“The equitable share is an important source of funding for basic services, particularly services provided to poor households.

“National Treasury must therefore balance its constitutional responsibility to enforce financial management requirements, with the need to avoid communities carrying the immediate consequences of failures by municipal institutions and officials.

“The release must accordingly be understood as a conditional release, intended to protect basic service delivery while requiring affected municipalities to correct the serious weaknesses identified through the Section 216(2) process,” the Minister said, indicating that withholding action could be taken again in December should municipalities not show evidence of compliance.

However, with local government elections scheduled for November 4, there was likely to be some leniency shown to provide the new administrations with some time and space to comply.

He also defended the triggering of Section 216(2), arguing that it had provided National Treasury with a clearer picture of the financial and governance position of the affected municipalities; one that showed that the challenges extended beyond cases of unauthorised, irregular, and fruitless and wasteful expenditure.

“They point to wider weaknesses in municipal budgeting, cash-flow management, financial oversight, accountability and consequence management,” Godongwana said.

He indicated that some of the conduct of municipalities, including the nonpayment of pension fund obligations, could still result in the laying of criminal charges.