By Thebe Mabanga
South Africa’s municipalities will have to make “painful” adjustments to become financially sustainable, including reducing their reliance on water and electricity revenue to fund other municipal functions.
This was stated by Finance Minister Enoch Godongwana, who briefed the media following National Treasury’s decision to withhold R13.5 billion in equitable share allocations from 69 municipalities.
Godongwana announced that some municipalities had rectified their non-compliance and would receive either a portion or all of their withheld funds next Thursday.
The minister, who had been out of the country for the past week, also criticised the South African Municipal Workers’ Union (SAMWU) for marching to National Treasury’s offices over the decision.
Godongwana pointed to one of the most serious transgressions by municipalities: the deduction of R1.7 billion in workers’ pension contributions that was never paid over to pension fund administrators.
He argued that SAMWU could not condone such behaviour.
SAMWU is also party to a R10.3 billion wage agreement with the City of Johannesburg, which has become a source of contention as it now appears unaffordable.
Johannesburg and other metros will also have to make adjustments as they adopt the Metro Trading Services model.
The model ring-fences revenue from electricity, water and waste collection, ensuring it is used only for those services.
This means municipalities will have to improve revenue collection from sources such as licence fees, permits and traffic fines to help fund other operational costs.
Godongwana acknowledged the fragile state of municipal finances.
“Importantly, this fragility is not solely the result of external socio-economic pressures such as rising bulk service costs, consumer debt, or weak local economies,” he said.
“A significant portion relates to the internal organisation of municipal finance itself. Many councils continue to adopt unfunded budgets, fail to process Unauthorised, Irregular, Fruitless and Wasteful Expenditure (UIFWE) through their Municipal Public Accounts Committees, and neglect consequence management.”
He said a key part of the remedy was ensuring Municipal Public Accounts Committees process UIFWE, noting that 116 municipalities — more than half of all municipalities — had adopted unfunded budgets.
Among them is the City of Johannesburg, which had R3.5 billion of its equitable share withheld.
Treasury has since assisted the city in restructuring its budget, which is now funded but still requires council approval.
Godongwana dismissed suggestions that the latest developments could strengthen calls for municipalities to receive a larger share of nationally raised revenue through the equitable share.
Municipalities currently receive 9.8%, while the South African Local Government Association (SALGA) has called for this to be increased to 17%.
He argued that many of the current transgressions have nothing to do with the equitable share and said municipalities would have to assume additional functions, such as health or education, from provincial governments before any increase could be justified.
Godongwana described the withholding of funds as “extraordinary but necessary”, reiterating Treasury’s position that the move was not punitive but corrective.
“South Africans deserve municipalities that are financially sound, accountable, and capable of delivering services,” he said.
He added that by invoking Section 216 of the Constitution, government was “signalling seriousness about governance, fiscal responsibility, and the rule of law.”
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