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.