By Thebe Mabanga
National Treasury will release the remaining R7.1 billion of the R13.5 billion in Local Government Equitable Share allocations withheld at the beginning of July, but Finance Minister Enoch Godongwana has warned that municipalities remain under pressure to comply with financial management requirements before the next quarterly transfer in December.
“National Treasury will commence releasing the remaining withheld July 2026 Local Government Equitable Share transfers from 31 July 2026,” Godongwana announced during a media briefing alongside Cooperative Governance and Traditional Affairs Minister Velenkosini Hlabisa.
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Of the 69 municipalities affected by the withholding of funds, 20 have already met the required conditions and received their transfers. Of the remaining 49, 21 will receive partial transfers while the other 28 will receive their full allocations.
The City of Johannesburg, which initially had R3.5 billion withheld, will receive a final tranche of R440 million after R2.6 billion was released to settle Eskom debt and just under R1 billion was allocated for payments to water boards.
Godongwana stressed that releasing the remaining funds should not be interpreted as an indication that municipalities had resolved their financial management shortcomings.
“I wish to make it clear that the decision to release the remaining transfers does not mean that the affected municipalities have satisfied the requirements of the MFMA, the Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings, or the requirements previously communicated in my letters addressed to the respective mayors and the press statement released by the department earlier this month,” he said.
He said the decision was taken to protect service delivery, as the funds would otherwise have been withheld for more than 30 days by next Monday.
Hlabisa said one of the main reasons for the intervention was municipalities continuing to table unfunded budgets, a practice he said had to end.
“They are committing lies by budgeting with funds they do not have,” he said.
Municipalities have argued that part of the reason they fail to comply with financial requirements is that provincial and national government departments owe them significant amounts of money.
In response, the ministers announced that provincial and national departments would also face punitive measures, including the withholding of equitable share allocations, if they failed to pay municipalities.
Hlabisa cited one example of a provincial government owing a municipality R700 million and proposing to settle the debt over seven years, describing such an arrangement as “unacceptable.”
Besides Johannesburg, municipalities affected by the withholding included the metros of Nelson Mandela Bay and Mangaung, district municipalities such as Sedibeng in Gauteng and Ngaka Modiri Molema in North West, as well as secondary cities including Matlosana.
The Free State remains the worst-performing province, with 16 of its 21 municipalities on the affected list, including Maluti-a-Phofung and Lejweleputswa.
One of the most serious compliance failures identified by Treasury was municipalities deducting pension contributions from employees but failing to pay the money over to pension funds. Of the R1.4 billion linked to unpaid pension contributions, about R1 billion is owed by municipalities in the Free State.
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The ministers dismissed suggestions that the withholding of equitable share allocations had prevented municipalities from paying employee salaries. They argued that the withheld funds are ring-fenced for specific purposes and should not have been used for salaries in the first place.
Hlabisa cited Mpendle Local Municipality in KwaZulu-Natal as an example of a municipality that was already struggling to pay salaries before the funds were withheld.
He reiterated that municipalities must use public funds for their intended purposes and said government was not seeking to collapse municipalities in the final months before the 4 November local government elections.
Hlabisa said current municipal councils had to ensure compliance before leaving office, warning that newly elected councils would have little time to rectify outstanding issues before the next equitable share transfers are due in December.
He also urged residents to pay for municipal services and to register to vote during the upcoming local government voter registration weekend.
