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Minister of Cooperative Governance and Traditional Affairs Velenkosini Hlabisa and Minister of Finance Enoch Godongwana held a briefing for media representatives to announce the temporary suspension of Municipal Equitable Share transfers.

Reasons for Withholding Funds

Earlier this year, the National Treasury suspended payments amounting to approximately 13.5 billion rands under the Municipal Equitable Share to 69 municipalities due to persistent and serious non-compliance with the Municipal Finance Management Act (MFMA). Although some municipalities have already received their allocations, approximately 7.1 billion rands remained unpaid for 49 municipalities.

The payment suspension drew criticism from some trade unions and the municipalities themselves, who warned that such a step could affect the provision of vital services.

Decision to Disburse Funds

During a press conference on Tuesday, Finance Minister Enoch Godongwana stated that the Treasury would make the payment of the remaining funds on Friday, July 31st. He explained that the decision was made because the funds had been held for almost 30 days, and further delay could negatively impact the provision of basic municipal services.

Godongwana emphasized that the allocation of money should not be interpreted as an admission that the municipalities have met the Treasury's requirements. Instead, he noted that the decision was made to protect the public while the municipalities continue to address deficiencies in managing their finances.

Identified Issues

According to Godongwana, the Treasury's assessment showed that the difficulties extend beyond instances of unauthorized, irregular, fruitless, and wasteful expenditure (UIFWE). The audit also raised questions about the reliability and funding of municipal budgets.

The Treasury identified weaknesses in several areas, including budget planning and financing, cash flow management, financial oversight, and consequence management. Godongwana added that some municipalities failed to adequately investigate UIFWE cases, implement disciplinary procedures, and take corrective action where necessary.

Next Steps and Conditions

Although the funds will be transferred, the payment remains conditional. Municipalities are still required to implement measures to rectify the deficiencies identified by the National Treasury. Godongwana clarified that progress will be assessed not only by the reduction of UIFWE balances but also by whether municipalities apply consequence management processes against those responsible for financial misconduct.

Municipalities must submit reports and supporting documentation within the Treasury's compliance program, with the first reporting deadline set for September 30, 2026. The Treasury also warned that it will continue to monitor the municipalities, and failure to demonstrate progress could lead to further actions affecting future allocations.

Finance Minister Enoch Godongwana stated that the National Treasury Department will disburse the remaining funds for transfers under the Uniform Distribution to local authorities for July 2026. This measure aims to prevent disruptions in the provision of basic municipal services.

Reasons for Fund Freeze

Previously, the Treasury suspended approximately R13.5 billion in transfers to 69 municipalities. The reason cited was the discovery of persistent and serious breaches of the Municipal Finance Management Act (MFMA). Although some municipalities have already received their allocations, an amount of about R7.1 billion remained unpaid for 49 municipalities.

Announcement of Fund Release

Despite this decision causing outrage among some trade unions and municipalities, who warned about the potential impact of the freeze on essential service delivery, Godongwana announced during a press briefing on Tuesday that the release of funds does not mean that the affected municipalities have complied with the Treasury's requirements. He emphasized that the decision was made to protect the public while municipalities must address their financial management issues.

Deepening Governance Issues

Godongwana clarified that the fund release occurred on July 31, 2026, as the funds had been held for nearly 30 days, with the deadline expiring on August 3. The goal of this step was to avoid negative short-term or medium-term impacts on the provision of basic municipal services. He also noted that the process uncovered deeper issues in the financial and public governance of municipalities.

Requirements for Municipalities

According to the minister, the Treasury's assessment showed that the difficulties extend beyond isolated cases of Unauthorised, Irregular, Inefficient, and Wasteful Expenditure (UIFWE). The process outlined in section 216(2) also highlighted the need for closer scrutiny of the accuracy and funding of municipal budgets. The minister pointed to weaknesses identified by the Treasury in budget formulation, cash flow management, financial oversight, and consequence management. It was noted that some municipalities failed to adequately investigate UIFWE cases, implement disciplinary procedures, and take corrective measures.

Conditions for Further Funding

Godongwana stated that the National Treasury Department will pay closer attention not only to the conduct of those responsible for initial expenditures but also to officials and structures responsible for investigating, reporting, and taking action on these expenditures. The fund release is conditional, and municipalities are still obliged to take steps to resolve the issues identified by the Treasury. He added that progress will be measured not only by the reduction of UIFWE balances but also by the implementation of consequence management processes. Municipalities will be required to submit reports and supporting documentation within the compliance program, with the first reporting deadline set for September 30, 2026. The minister warned that the Treasury will continue to monitor the municipalities, and failure to demonstrate progress could lead to further action on future allocations.