Funds intended to ensure a dignified retirement for workers, which were deducted directly from their salaries, have disappeared due to ineffective management at the municipal level. It has been found that South African municipalities owe R1.7 billion in pension contributions.
This revelation is viewed not merely as an accounting error or budget deficit, but as a coordinated theft of the future savings of workers who support local government operations. Proponents argue that this cannot be masked as an 'administrative failure.' For a long time, municipal and political leaders used employee salary deductions as an untouchable fund.
The amount of R1.7 billion was noted by Finance Minister Enoch Godongwana during a compliance audit conducted by the Ministry of Finance. This fact became one of the reasons why the Ministry of Finance suspended the transfer of a fair share of R13.5 billion to 69 municipalities across the country that failed to meet requirements. However, among these 69 municipalities, which have debts to Eskom, water utilities, SARS, and the Auditor-General, only 16 were specifically noted for overdue pension payments.
In a broader context, the Financial Sector Conduct Authority (FSCA) reports that the total amount of unpaid pension contributions by all employers in the country reaches R8.3 billion, with municipalities and trade unions being the largest offenders. A significant portion of these debts is concentrated in the North West and Free State provinces, which bear almost 80% of the total municipal pension debt.
Although the suspension of allocations by the Ministry of Finance has already taken effect, leading to improved compliance in some parts of local government after the funding freeze began, the recovery of pension funds since the publication of the FSCA defaulters list in 2022 amounts to only about R1 billion, which is 12% of the total debt. At the current rate of recovery, most affected workers will not receive their money before retirement.
The FSCA clearly states that employers who withhold pension contributions bear personal responsibility. This principle must apply without exception to the public sector. Municipal managers as accounting officers and mayors who lead them cannot hide behind institutional structures. Pension funds have already filed about 600 criminal cases with the police, and at least one case has been referred to the National Prosecuting Authority for consideration of criminal charges.
This crisis reflects a wider trend: the same leaders who left communities without water, electricity, and reliable infrastructure are now misappropriating the pension savings of their own employees. If officials can withhold colleagues' pensions, it is not surprising that they fail in their duties to citizens. Law enforcement agencies must stop treating this as a civil dispute and start classifying credible cases as theft, as unions and regulators already call it. The investigations underway must move towards prosecution, and the management of consequences must strike at the individuals responsible, not at the municipality's budget line, which taxpayers ultimately pay for. The municipalities mentioned in the Ministry of Finance's debt list should no longer offer excuses; accountability cannot wait for the next fiscal cycle, and workers' pension funds cannot be used as collateral for others' failures.
The National Treasury has temporarily suspended the transfer of municipal grants for July 2026 to over 60 local government structures, including Johannesburg. This decision was made because these structures failed to promptly resolve their financial issues.
The National Treasury announced the temporary withholding of transfers due to 'persistent and serious non-compliance' with the Municipal Finance Management Act (MFMA) and related provisions, despite support provided by the Treasury through consultations, engagement, and communication.
The announcement of transfer suspension affected numerous municipalities in South Africa and revealed widespread financial mismanagement. Municipalities incurred losses amounting to R24.12 billion in early and wasteful expenditure since 2021-22. Furthermore, irregular expenditure reached R145.21 billion, with R40.14 billion recorded just for the 2024-25 financial year.
Since 2021-22, municipalities have disclosed R118.13 billion in unauthorized expenditure, of which R63.43 billion relates to budget items not involving cash. In 2024-25, 116 municipalities (45 percent) adopted unpaid budgets, which is higher than the figure of 113 (44 percent) in the previous year's adjusted budget.
By the end of 2024-25, municipalities owed Eskom R3.40 billion in interest and water boards R1.21 billion in interest. Moreover, 48 municipalities (20 percent) had overdue third-party deductions exceeding one month. The National Treasury noted that many municipalities failed to process instances of unidentified, irregular, fruitless, and wasteful expenditure (UIFWE) through their Municipal Public Accounts Committees (MPACs).
The Treasury stated that non-compliance with financial legislation is not only a failure of fiduciary duties by municipal political and administrative leadership but also threatens the financial sustainability of essential service providers such as water boards and Eskom. Non-payment to third parties negatively impacts the ability of public bodies to function optimally.
Transfers will resume after the affected municipalities meet the necessary conditions and provide proper confirmation of their fulfillment. The Treasury expects the suspension to be short-term so as not to affect service delivery. It was emphasized that municipalities were given sufficient written notice urging them to take steps to improve their financial situation before the funds were frozen.
Professor Joseph Sekhampu, Director of the NWU School of Business, noted in a recent statement that the consolidated Auditor-General's report for 2024-25 showed that none of the metropolitan municipalities received an unqualified audit. Five metros have a qualified audit opinion, compared to two at the beginning of the sixth term.
According to Professor Sekhampu, total water losses in eight metropolitan municipalities amounted to nearly R10 billion, electricity losses exceeded R17 billion, and the average creditor payment period reached 121 days. He suggested that the dominant explanation for local government problems in South Africa has always been that many municipalities are too small, poor, and administratively fragile to operate effectively. However, according to the professor, the findings regarding the metros point to a different governance issue: metropolitan municipalities are not primarily constrained by resource scarcity, as they manage R336 billion—about 54% of local government expenditure—and serve almost 25 million people, possessing the institutional and financial capacity expected of large urban governments, yet continuing to face serious management breakdowns.
Residents of the informal settlement of Gate 7 in Cape Town are protesting due to insufficient service provision. The article emphasizes that concepts such as 'accountability' and 'consequence management' are crucial for improving the municipality's audit results.
On June 24, 2026, the Auditor-General of South Africa, Tsakana Maluleke, presented a consolidated report reflecting the audit results for the 2024–2025 period as part of her constitutional duty. One of the auditor's key observations was that the sixth administration, whose term ended in May 2024, failed to achieve desired improvements in local governance. This constituted a serious accusation regarding the government's inability to take action against dishonest officials.
The auditor's report notably showed that only 39 municipalities received an unqualified audit opinion, which accounts for just 15% of all 257 municipalities in the country. This figure is lower than the 41 municipalities that received an unqualified opinion in the previous annual report.
The Auditor-General expressed particular concern that the 2024–25 audit results demonstrate a serious decline in metropolitan municipalities across the country. Unqualified audits in Cape Town, eThekwini, and Johannesburg were insufficient to offer hope for improvement. Issues such as lack of ethical conduct and conflict of interest have impacted the audit outcomes.
Previously, the City of Cape Town was often cited as an example of effective municipal management. President Cyril Ramaphosa sparked a lively discussion by acknowledging that the most successful and well-managed municipalities in the country are led by the DA party, naming Cape Town and Stellenbosch among them. However, according to this year's report, Cape Town also recorded a decline linked to identified problems in procurement and contract management that were handled improperly.
Even in areas where positive results were noted in the current report, the Auditor-General raised several questions. For instance, the number of municipalities with adverse opinions decreased from 29 to 8, which appears to be a positive step forward. Nevertheless, seven of these eight municipalities are repeats for some reason over three to ten consecutive years. This indicates a lack of intent to improve the situation and a lack of consequences for failing to meet mandates.
President Ramaphosa has repeatedly voiced government concern over the state of municipalities in the country and their inability to provide services to the public. He promised the nation that the government would intervene and punish those municipal officials who fail to fulfill their mandate. Specifically, he committed to holding municipal managers personally accountable for failing to provide public services.
Examples of reasons why municipal managers might be reprimanded for failing to ensure leadership include water shortages and misuse of infrastructure funds. Ramaphosa stated that criminal cases have already been initiated against 56 municipalities to set a precedent. Municipal managers have been informed that they could face criminal prosecution or even imprisonment if they fail to perform their duties.
To strengthen this warning, Ramaphosa subsequently signed the Local Government Amendment Act: the Municipal Systems Act. This act prohibits municipal and senior managers from holding political positions in their political parties. Although such mechanisms look promising on paper, the problem in South Africa is not the enactment of laws or policies, as the country has proven its ability to do so. The main issue is the lack of implementation of these laws and policies, caused by weak monitoring and evaluation mechanisms.
Therefore, neither Ramaphosa's threats nor the amended legislation will automatically pull our municipalities out of the current crisis. Targeted and conscious action is required against those who contribute to municipalities receiving negative audit opinions. It is worth noting that municipal managers are not the sole culprits. Municipal councils and mayors in these municipalities bear supervisory responsibility. Failure to fulfill this mandate constitutes negligence on their part, so those responsible for oversight cannot suddenly absolve themselves and blame municipal managers as scapegoats.
In his audit report, the Auditor-General noted that these oversight structures remain ineffective, leading to poor municipal performance. The auditor regretted that control continues to deteriorate, stating that 'non-compliance often boils down to a mere procedural matter, despite the increased risk of fraud in procurement and significant financial losses arising from inadequate contract management.'
Such observations indicate that the problem is more serious than it appears. A huge amount of work is needed to change this situation. Any attempt to focus exclusively on municipal managers while leaving other stakeholders without consequences will not change the current state of our municipalities. For these municipalities to improve their audit results, all stakeholders must increase their activity, including both political leadership and municipal administrators.
Although municipal managers play an important role in the functioning of municipalities, most audit findings relate to the work of Chief Financial Officers (CFOs). If they cannot create and implement systems, the Auditor-General will continue to issue adverse audit opinions. Conversely, in cases where municipal CFOs know what needs to be done but do not receive support from their superiors, they will be unable to change the current situation. Concepts such as 'accountability' and 'consequence management' are critical for improving municipal audit results, but if these concepts exist only on paper and are not implemented, no positive change will happen miraculously, and our municipalities will continue to receive adverse audit opinions.
