Treasury decides to allocate 7.1 billion rands to municipalities after temporary suspension of payments

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.