By Jonathan Erasmus
National Treasury earlier this month took a step that should have been taken long ago. It temporarily withheld the July equitable share transfers of 69 municipalities because of serious and persistent financial mismanagement.
That is more than a quarter of South Africa’s 257 municipalities.
Treasury’s reasoning was sound. In some respects, it resembled a parent withholding a child’s weekly pocket money when it is repeatedly squandered and rules are ignored.
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But municipalities are not children that can be quickly disciplined.
They have lawyers, unions, political interests and entrenched patronage networks feeding from the public purse. More importantly, when funding is withheld, it is seldom councillors and senior administrators who feel the consequences first. It is residents.
Treasury effectively acknowledged that danger on Tuesday. Finance Minister Enoch Godongwana announced that the remaining withheld July equitable share transfers would be released to avoid an adverse short- to medium-term effect on the delivery of basic municipal services.
By then, 20 municipalities had received their full equitable share allocations, 21 had received partial allocations and 28 had received nothing. The outstanding allocations for the remaining municipalities are due to be released on Friday.
The release is conditional and does not mean that the municipalities have met their legal obligations. Treasury has retained a 30 September reporting deadline, followed by further deadlines on 31 October and 30 November for municipalities to demonstrate progress in processing unlawful expenditure and implementing consequence management. Failure to make measurable progress could result in the December equitable share instalment being withheld.
This was not Treasury’s first attempt to discipline the errant municipal child. The affected municipalities were given notice and a chance to explain why their funds should not be withheld. Treasury said it also supported them through circulars, engagements, training, and national and provincial forums.
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But many continued to ignore their legal obligations.
Treasury described this as a “dereliction of fiduciary duties by the political and administrative leadership of municipalities”. It warned that municipal failures were threatening councils and bulk suppliers such as Eskom and the water boards.
Since the 2021/22 financial year, municipalities and their entities have incurred R145.21 billion in irregular expenditure. That bill alone is almost R50 billion larger than Johannesburg’s R97.1 billion budget for 2026/27.
Many affected municipalities are not small councils with almost no economic base.
They include the metropolitans of Buffalo City, Nelson Mandela Bay, Mangaung and Johannesburg, as well large towns such as Emfuleni, Merafong City, Rand West City, Lesedi, Newcastle, Makana and JB Marks.
These municipalities have populations, businesses, property markets and revenue-generating potential. Their collapse cannot simply be blamed on poverty or a weak rates base. In many cases, it results from poor governance, weak revenue collection, political interference, irresponsible budgeting and an almost complete absence of consequence management.
The government’s answer is an extensive redesign of local government, set out in the Reviewed Draft White Paper on Local Government, gazetted on 7 May 2026.
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The White Paper contains about 65 recommendations covering municipal structures, political leadership, professionalism of the workforce, finance, infrastructure, citizen participation and accountability.
But even if fully implemented, it will not fix local government on its own. In a best-case scenario, some reforms will take place only between 2027 and 2031, while other legislative and regulatory changes are expected only in the following municipal term.
The municipalities identified by Treasury are in serious financial distress now. They cannot remain in a five-year holding pattern. During that period, several could collapse, fail to pay staff, face protests by unions and communities, and halt services.
The delays surrounding coalition legislation further illustrate the problem. Laws intended to regulate unstable coalitions and limit the abuse of motions of no confidence have not been finalised. Related Municipal Structures Amendment Bills remained before Parliament’s Cooperative Governance and Traditional Affairs committee as recently as June.
Looking ahead is troubling. Before the 2029 election, the ANC may have new, more ideologically driven leadership, the Government of National Unity could have collapsed, and the MK Party, which has shown a lack of financial and organisational capacity, could be leading KwaZulu-Natal.
The uncomfortable reality is that South Africa lacks a consistently enforced strategy for repairing broken municipalities.
The ballot box remains one of the few ways residents can remove failed political leaders, but elections alone cannot rebuild an institution. Voters can replace a mayor or governing party, only to find the same compromised officials, contractors and patronage networks embedded in the administration.
Nor is withholding funding enough. It may force municipalities to produce compliance plans, but it will not rebuild billing systems, recover stolen money, repair infrastructure or remove incompetent officials.
The answer must be to place the consequences directly on those responsible.
Political office-bearers and administrators who adopt unfunded budgets, ignore financial laws or fail to recover unlawful expenditure must face disciplinary, civil and, where appropriate, criminal consequences.
Failed officials should not be moved to another municipality, and councillors should not be protected by their parties after presiding over financial collapse.
Ultimately, the most important reform is a change in mind-set among councillors and administrators who regard public money as part of their personal or political fiefdoms.
National and provincial governments have also failed to act. Too often, political interests have stopped major interventions. They may have issued warnings, provided training and offered support, but allowed deadlines to pass without meaningful consequences.
They have spared the rod and spoiled the child.
It is time to correct that mistake.
Johnathan Erasmus is Managing Director of the Community Action Network (CAN).
