The National Treasury has temporarily withheld R13.5 billion in equitable share allocations to 69 municipalities in a move aimed at enforcing financial discipline and improving governance at struggling local authorities.
Treasury Director-General Dr Duncan Pieterse told Parliament that the decision followed months of engagement with municipalities that repeatedly failed to meet their obligations under the Municipal Finance Management Act (MFMA).
Addressing the Portfolio Committee on Cooperative Governance, Pieterse described the intervention as a measure of last resort rather than a punishment.
He explained that Treasury began consulting with non-compliant municipalities in December last year after issuing formal notices in September and again in December, warning that equitable share payments could be withheld if corrective action was not taken.
According to Pieterse, the number of municipalities initially facing the suspension stood at 99, but this was reduced to 69 after several councils took steps to address Treasury’s concerns and improve their financial management.
“The intervention is intended to stop further financial deterioration in municipalities that have consistently failed to comply with their legal obligations,” Pieterse said.
Finance Minister Enoch Godongwana defended the decision, saying the Constitution and the Municipal Finance Management Act empower Treasury to suspend transfers where municipalities fail to meet statutory requirements.
He said the funding could be withheld for up to 120 days, subject to parliamentary oversight.
“Our view is that we are entitled to go up to 120 days, provided Parliament has not instructed us to stop. That is why we notify Parliament, allowing it to consider whether we should proceed and under what conditions,” Godongwana told the committee.
Treasury maintains that the temporary suspension is designed to encourage municipalities to restore sound financial management before funding is released, rather than to penalise local authorities.