National Treasury Suspends Johannesburg Funding Due to Financial Irregularities

The city of Johannesburg has faced a significant dilemma as the National Treasury temporarily suspended the allocation of a large portion of its funds, forcing the municipality to revise its financial strategy amid growing difficulties in service delivery.

Scale of Fund Freeze

Johannesburg is one of 69 municipalities nationwide that the National Treasury has temporarily denied a fair share of R13.5 billion. Only Johannesburg has been hit with a freeze of R3.6 billion.

This was announced by Ogalaletseng Gaarekeve, Deputy Director-General of the National Treasury for Intergovernmental Relations, during a press briefing on Wednesday. The decision followed the Treasury's announcement on Tuesday of a partial withholding of municipal fair share transfers for July 2026 due to ongoing non-compliance with the Municipal Finance Management Act (MFMA) and related regulations.

Objectives of Treasury Intervention

This intervention is part of efforts to ensure financial discipline, enhance accountability, and address persistent financial mismanagement. The affected municipalities are located across all nine provinces.

The Treasury stated that the decision was made after repeated meetings with municipalities that consistently failed to comply with financial management legislation despite receiving support and guidance. The department emphasized that the municipalities were given ample notice and an opportunity to explain why their transfers should not be delayed.

The fund delay was implemented in accordance with Section 216(2) of the Constitution combined with Section 38 of the MFMA. The Treasury insists that this intervention is corrective, not punitive. It noted that since the freeze will be temporary, the National Treasury does not foresee any impact on service delivery.

Requirements for Municipalities

Among the affected municipalities in the Gauteng province are the City of Johannesburg, Emfuleni, Lesedi, Sedibeng District Municipality, eMalahleni Local Municipality, and Rand West City.

Gaarekeve reported that some municipalities submitted budgets without funding and were required to commit to avoiding this practice in the future, whether in corrective or core budgets.

Furthermore, other municipalities had outstanding debts to creditors, including water boards, Eskom, the Auditor-General, SARS, and pension funds. The Treasury is requesting payment plans from these municipalities, signed by both the municipality and the creditor. Once such a plan is provided, a portion of the money, likely one-third, will be released to settle these accounts, with the remainder released after proof of payment is provided.

Gaarekeve clarified that the freeze period could be relatively short—from one week to one month, depending on the municipality's promptness. Municipalities were also required to submit plans to reduce unauthorized, irregular, fruitless, and wasteful expenditure. It was noted that the number of affected municipalities has decreased from 99 to 69, as some have met their obligations to the Treasury.

Additional Measures and Mayor's Reaction

Gaarekeve confirmed that out of the total fair share of R110 billion for municipalities in the current fiscal year, only R13.5 billion has been frozen, of which R3.6 billion is frozen from the City of Johannesburg. The Treasury is also scrutinizing state departments and provinces that fail to disburse funds to municipalities. For example, one province proposed paying R700 million over seven years, which the Treasury deemed unjustified.

The recent development occurred just days after the sheriff seized assets of the City of Johannesburg due to unpaid debts, leading to the temporary closure of the flagship customer service center, Thuso House. The seizure happened after the city failed to repay a debt of R3.4 million to creditors. The city acknowledged the late payment, attributing the delay to system failures that disrupted payment processes.

Johannesburg Mayor Dada Morelo stated that measures are being taken to recover the seized assets. She reported that the center will resume normal operations once all necessary logistical arrangements are completed. At the press briefing on Wednesday, Morelo insisted that the city is not experiencing a financial crisis. She mentioned receiving confirmation from the National Treasury regarding the full funding of the city's budget for 2026–2027, which she said confirms that financial management is in order and has not reached a critical point. The mayor also noted that she plans to use these funds to settle existing debts owed to Rand Water and Eskom.

The South African Federation of Trade Unions (SAFTU) and the South African Local Government Association (SALGA) have called for officials to be held accountable following the National Treasury's decision to temporarily suspend fair share transfers for July to 69 municipalities that failed to comply with financial regulations.

Reasons for the fund freeze

The Treasury explained its decision by citing persistent and serious non-compliance with the Municipal Finance Management Act (MFMA) and its supporting regulations, despite support, guidance, interaction, and communication provided. The Department stated that these municipalities were given sufficient written notice and a strong request to take measures to change their financial standing before the funds were blocked. They were also given the opportunity to provide a written justification as to why their funds should not be withheld.

Scale of financial problems

The list of municipalities affected by the restrictions includes major cities such as Johannesburg, Buffalo City, Nelson Mandela Bay, Mangaung, and Matjambeng, as well as district and local municipalities from all provinces in the country. The fair share is an unconditional grant derived from national revenue, which guarantees the ability to provide free basic services to poor households and maintain administrative infrastructure, even if the local tax base is limited. Despite receiving billions through fair shares, these municipalities have found themselves in crisis.

Reports and statistics

The Treasury relies on the recent audit of local government for 2024/25 conducted by the Auditor-General of South Africa, which largely confirms the Treasury's existing assessments. Since 2021/22, municipalities have incurred losses of R24.12 billion due to wasteful and fruitless expenditure. Over the same period, municipalities and their structures incurred R145.21 billion in irregular expenditure, with only R40.14 billion spent in 2024/25. Furthermore, since 2021/22, they have disclosed R118.13 billion in unauthorized expenditure. In 2024/25, 116 municipalities, or 45%, adopted budgets without funding, which is higher than the 113 municipalities (44%) in the previous year's budget. By the end of the 2024/25 financial year, municipalities owed Eskom R3.4 billion in interest and water boards R1.21 billion in interest. Delinquent payments also affected state organs and third parties. The Treasury added that 48 municipalities had outstanding third-party deductions for more than one month.

SAFTU's demands

SAFTU Secretary-General Zwelinzima Vavi stated that corruption, mismanagement, financial misconduct, and the looting of municipal resources have destroyed service delivery and betrayed millions of workers and poor communities. Vavi noted that the latest Auditor-General report revealed the shocking scale of the crisis in local governance, showing persistent management weaknesses, widespread financial misconduct, poor internal controls, rising irregular expenditure, and the continued inability of many municipalities to properly account for public resources. He emphasized the need for decisive action against corruption and misconduct, demanding that municipal managers, chief financial officers, accountants, and political leaders who violate financial management laws face real personal consequences, including criminal prosecution where necessary.

Vavi also called on the National Treasury to abandon the austerity program and reverse the continuous reduction of transfers to local government. He believes that the collapse of municipalities cannot be solved solely through punitive fiscal measures while municipalities operate amid mass unemployment, deindustrialization, and shrinking tax bases. He proposed that the government implement a comprehensive program to restore local governance through professional administration, strengthened financial oversight, investment in local economic development, industrialization, infrastructure expansion, and job creation.

SALGA's position

For its part, SALGA expressed concern that the Treasury cited the non-payment of pension fund contributions, UIF contributions, and PAYE deductions—which had already been deducted from employee salaries—as a reason. The association stated that these funds do not belong to the municipalities and should never be used for other purposes, as such behavior undermines employee rights, public trust, and exposes municipalities to financial and legal risks. SALGA insists on zero tolerance for financial misconduct and persistent non-compliance, demanding that councils, accountants, and oversight bodies investigate irregular expenditure, hold those responsible accountable, and recover losses in accordance with the law.

Expert assessment of the situation

Management expert Andre Duvenhage noted that despite uncertainty regarding the underlying political strategy, the current operations cannot continue normally. He described the current national situation as reaching a critical point, warning that this threshold will soon be crossed in many local municipalities.

The Deputy Chairperson of the National Council of Provinces, Les Govender, asserts that the expanded cabinet was necessary to ensure stability and inclusion in the coalition government. He emphasized the importance of implementing performance indicators and accountability mechanisms.

Principles for Appointing Officials

Govender noted that the increased size of the executive branch reflects South Africa's unique political conditions. He stated that historically bloated cabinets have been used for political patronage, and government positions should never be tied to rewarding loyalty, but solely to service delivery.

He established a series of non-negotiable requirements for appointing members of the executive branch: strict performance metrics for each minister, six-month feedback cycles from the president to Parliament, and stringent measures to cut executive spending.

The Need for Inclusivity

In Govender's view, the current cabinet composition serves as a tool to ensure participation during the period of coalition rule. He reminded that for the first time in 30 years of democracy, no single party holds an absolute majority, and the voters' mandate required either collaboration or collective failure.

In this context, the cabinet of 75 ministers and deputy ministers is not excessive, but rather 'engineering'—engineering aimed at ensuring inclusivity, stability, and nation-building. He warned against reducing representation under the pretext of saving money.

Balancing Discipline and Representation

Govender acknowledged the need for cost reduction but insisted that democratic inclusivity must remain a priority. He stressed the necessity of eliminating waste of public funds, duplication of functions, and extravagance, but one cannot deny the voice of the people. During the seventh term, financial discipline and inclusive representation must be combined, as the cabinet represents a democracy of representation, not merely a budget line item.

He described the GNU as a transitional system, not a permanent model. This expanded cabinet is temporary and serves as 'scaffolding' while ten parties learn to govern together. This allows for diligent work toward the upcoming local and general elections in 2029.

Govender concluded that it must be proven that the coalition government can be stable, that inclusive representation can be accountable, and that with IFP's participation, service delivery will not be subject to bargaining. He added that financial discipline is important, but without democratic inclusivity, it becomes just another form of exclusion.

Opposition View

The leader of the Minority Front, Shamin Takur-Rajbanshi, welcomed the campaign initiated by Free SA. She called this discussion long overdue and related to government efficiency, accountability, and responsible use of public funds.

Takur-Rajbanshi noted that in a situation where millions of South Africans expect more from less, the government must be prepared for such changes. She stated that they have consistently argued that the executive branch has become excessively large and expensive, and the growth in the number of cabinet positions has not always led to improved governance or higher quality of services.

According to her, in some cases, this has caused duplication of functions, overlapping mandates, and confusion in responsibilities.