By Johnathan Paoli
Finance Minister Enoch Godongwana’s 2025 Medium-Term Budget Policy Statement (MTBPS) has set out an ambitious and reform-oriented agenda to strengthen local government performance, signalling a decisive shift toward accountability, professionalisation, and infrastructure-led growth at the municipal level.
Godongwana also announced that R1 billion has been allocated to the Independent Electoral Commission (IEC) for the 2026 municipal elections.
Presenting the statement in Parliament on Tuesday, Godongwana said municipalities would remain central to South Africa’s service delivery model but warned that new measures are needed to ensure that public funds deliver tangible results, especially in basic services such as water, sanitation, electricity, and waste management.
“Municipalities are at the forefront of providing essential services, but many are fraught with capacity constraints that hinder their ability to turn allocated budgets into reliable services,” he said.
Municipalities, said Godongwana, will receive a slightly higher share of the national budget.
According to the MTBPS, the share of nationally raised revenue for municipalities will increase to 9.7% over the medium term, compared to 9.4% previously.
This adjustment, Godongwana said, accounts for population growth and the higher cost of providing free basic services, including bulk water and electricity purchases.
Provinces, meanwhile, will see their share of revenue increase to 42.4% — aimed at safeguarding essential social services such as education and healthcare.
Godongwana stressed that the increased transfers come with greater responsibility and that allocations to local government are not merely transfers, but instruments of accountability.
Treasury will use performance-linked monitoring to ensure funds reach communities rather than being lost to inefficiency or corruption.
One of the cornerstone announcements for municipalities was the reform of the Municipal Infrastructure Grant (MIG), a key funding mechanism for local infrastructure projects.
The minister said the MIG would undergo systemic restructuring to address persistent underspending and poor project delivery.
Godongwana stated that where municipalities show persistent failure, delivery will shift to an indirect model through agencies like the Municipal Support Infrastructure Agent and the Development Bank of Southern Africa.
This model, he explained, will ensure that projects such as water pipelines, roads, and sanitation infrastructure are completed on time and within budget, even when local capacity is weak.
Municipalities that lose direct control of grant spending will be required to adopt time-bound capability improvement plans before direct funding is restored.
In a further bid to stabilise municipal operations, the minister announced the launch of a utility reform pilot programme targeting struggling water and electricity businesses.
The initial pilot sites will be located in Mpumalanga municipalities, where long-standing governance and infrastructure challenges have hampered service delivery.
The reform programme aims to professionalise municipal utilities, improve billing systems, strengthen governance, and introduce cost-reflective tariffs that still protect indigent households.
By partnering with accredited intermediaries like the DBSA, Treasury hopes to create sustainable service entities capable of operating independently from political interference.
Godongwana announced the establishment of a new Infrastructure Finance and Implementation Support Agency, to become operational by March 2026.
The agency will help municipalities prepare bankable projects and attract private sector co-investment, addressing one of the biggest barriers to local infrastructure delivery, poor project preparation and financing capacity.
Municipalities will also benefit from reformed public-private partnership (PPP) regulations, which took effect in June this year.
These changes simplify approvals and unlock investment potential, particularly for smaller-scale water, sanitation, and transport projects.
A new infrastructure bond, aimed at raising at least R15 billion, will provide an additional financing stream for projects across all spheres of government.
Godongwana highlighted the progress of the Water Partnerships Office, which is preparing non-revenue water and reuse projects across municipalities to curb wastage and improve efficiency.
These initiatives, he said, would create a robust pipeline for private sector participation while reinforcing municipalities’ long-term sustainability.
To strengthen financial integrity at the local level, Treasury will extend the reach of its newly launched Procurement Payments Dashboard; a digital platform that publicly displays government payments to suppliers.
This tool, which initially covers national and provincial departments, will later be adapted for municipal use.
At the same time, the minister announced that Treasury’s ongoing partnership with the Public Service and Administration and Home Affairs departments had already uncovered around 9,000 high-risk ‘ghost worker’ cases, including at local government level.
The 2025 MTBPS frames local government as both the frontline of service delivery and a key lever of national growth.
However, it also places municipalities under closer scrutiny than ever before.
The minister insisted that if implemented effectively, the new framework could usher in a new era of performance-based municipal governance, redirecting billions from wasteful spending toward the infrastructure and services that underpin South Africa’s economic recovery.
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