Finance Minister Enoch Godongwana has revealed plans to withhold millions of rand in grants from 39 municipalities that have repeatedly failed to settle massive debts owed to water boards and other statutory bodies. The municipalities, predominantly located in the Free State, Gauteng, Mpumalanga, Northern Cape, North West, and Limpopo, now face stringent conditions aimed at rectifying their financial mismanagement.
Godongwana’s communication to Cooperative Governance and Traditional Affairs Minister Velenkosini Hlabisa highlights the urgent situation facing 18 municipalities, which collectively owe nearly R18 billion to four critical water boards—Vaal Central, Magalies Water, Lepelle Northern Water, and Rand Water. The Matjhabeng Local Municipality alone contributes over R8.13 billion to this staggering figure, with other local governments like Kopanong and Mafube also deep in arrears regarding pension fund contributions, amounting to R330 million and R253.4 million respectively.
To combat this alarming trend, Godongwana has urged the water boards to enforce robust credit control measures, including potentially attaching the bank accounts of consistently defaulting municipalities. “This is not merely a warning but a necessary action to ensure compliance and financial responsibility,” he stated.
Details of these financial strains were underscored by Godongwana, who pointed out that these municipalities still owe approximately R820 million to pension funds, with the Auditor-General of South Africa also owed R68.4 million by six municipalities. Furthermore, the South African Revenue Service is awaiting R197.5 million from eight municipalities, compounding the fiscal crisis.
In his letter dated June 30, Godongwana invoked the Municipal Finance Management Act (MFMA) to outline the government’s intention to halt the transfer of equitable shares and grants to the municipalities in breach of their obligations. “The Constitution empowers the National Treasury to enforce compliance, and we will act decisively against any material breaches of financial discipline,” he said.
This approach stipulates that in order for municipalities to receive any withheld funds, they must first demonstrate they have settled all outstanding debts to the water boards. Specifically, the first tranche of any equitable share released will be strictly designated for settling current accounts with water boards. Following this, municipalities must provide evidence of payment to begin addressing any arrears through valid repayment arrangements.
If these requirements are not met, the National Treasury will seek parliamentary endorsement to cease all transfers of the equitable share due for the remainder of the 2025/26 financial year—an unprecedented measure designed to enforce accountability. Godongwana clarified that a similar process would apply to municipalities that persist in adopting unfunded budgets.
In tandem with these measures, the South African Local Government Bargaining Council has advised trade unions to pursue compliance orders against municipalities that neglect medical aid scheme contributions due to workers. This serious oversight only deepens the fiscal trouble faced by the affected municipalities, highlighting a broader issue of financial governance within local government structures.