National Treasury says municipalities must adopt realistic budgets and agree on sustainable repayment plans with creditors before withheld funding can be released, following its decision to temporarily withhold R13.5 billion in July equitable share transfers to 69 municipalities that failed to comply with the Municipal Finance Management Act (MFMA).
Speaking during a question-and-answer session on Wednesday, Local Government Budget Analysis Specialist Jan Hattingh said many municipalities continue to approve budgets that are not financially sustainable, placing additional pressure on already strained municipal finances.
“Many municipalities adopt budgets that are not adequately funded. Councils need to approve realistic, funded budgets that align with available revenue and expenditure projections to improve financial sustainability,” Hattingh said.
Treasury official Ogalaletseng Gaarekwe said the withheld funds would only be released once municipalities reached sustainable payment agreements with their creditors.
“Municipalities must first agree on sustainable payment plans with creditors. These arrangements are intended to help municipalities meet their financial obligations while maintaining basic service delivery and improving financial management,” Gaarekwe said.
The South African Local Government Association (SALGA) acknowledged the need for improved financial discipline but cautioned that municipalities continue to face deep-rooted fiscal challenges.
“Local government continues to face structural and systemic fiscal challenges that require urgent support and reform. Any withholding of equitable share allocations must strike a balance between compliance and the continued delivery of essential services,” said SALGA spokesperson Motalatale Modiba.
Meanwhile, Parliament’s Portfolio Committee on Cooperative Governance and Traditional Affairs welcomed Treasury’s intervention. Committee chairperson Zweli Mkhize said the temporary withholding of funds was necessary to promote accountability and ensure municipalities address unauthorised, irregular, fruitless and wasteful expenditure.
The municipalities affected include the City of Johannesburg, Nelson Mandela Bay, Mangaung and Matjhabeng, among others. Treasury maintains the measure is intended to strengthen financial governance and improve municipal accountability.
Photo: X/ @GovernmentZA
