The Department of Cooperative Governance and Traditional Affairs (CoGTA) and the National Treasury are currently drafting a Cabinet memorandum. This document could lead to the withholding of funds allocated to national and provincial departments that consistently fail to remit payments due to municipalities.
Minister Velenkosini Hlabisa of CoGTA disclosed this information while addressing parliamentary inquiries from IFP MP Zuzifa Buthelezi. This discussion followed the National Treasury's action in July, where it temporarily withheld the equitable share allocation from 69 municipalities due to their failure to adhere to financial governance and management regulations.
It was previously reported that departments owed municipalities R15 billion concerning unpaid property rates and services. Hlabisa confirmed that existing legislation grants municipalities the authority to levy property rates and apply surcharges on services rendered.
Furthermore, accounting officers within national and provincial departments were required to fulfill all contractual duties and settle outstanding debts within a mutually agreed timeframe. Hlabisa emphasized that both constitutional and statutory mandates require these national and provincial departments to pay municipal property rates and service account balances.
Hlabisa also noted that his department, working alongside the National Treasury, is driving reforms to enhance accountability across all levels of government regarding financial responsibilities. The primary method involves developing a draft Joint Cabinet Memorandum. This memo seeks Cabinet approval to utilize Section 216(2) of the Constitution against national and provincial departments that repeatedly neglect their financial commitments to municipalities.
The goal of this reform is to harmonize the accountability standards applied to municipalities with those applied to national and provincial departments when serious or ongoing non-compliance with financial obligations occurs. Hlabisa stated that the proposed measure aims to guarantee departmental responsibility for paying for rates and services.
The draft Joint Cabinet Memorandum is presently being finalized, and input has been requested from the Department of Public Works and Infrastructure. This department is crucial as the custodian of state-owned properties and a major contributor to the debt held by state organs against municipalities.
Additionally, efforts are underway to bolster coordination between CoGTA and the National Treasury. This coordination aims to identify, confirm, and track debts owed by state organs to municipalities, while also considering suitable enforcement actions.
In parallel, Finance Minister Enoch Godongwana announced that his department has paused the withholding of allocations to the affected municipalities. He clarified that the National Treasury released the funding on July 31, 2026, because the National Treasury is prohibited from withholding the Equitable Share for longer than 30 days without the requisite parliamentary consent.
Responding to EFF MP Omphile Maotwe, Godongwana explained that the suspension of enforcing Section 216(2) came after an assessment. This assessment included actively monitoring the compliance of the affected municipalities following the temporary halt of fund transfers. He added that the National and Provincial Treasuries are providing support to these municipalities as they implement necessary corrective actions.
Specific targets, activities, milestones, and timelines were communicated to the affected municipalities, which are expected to demonstrate tangible progress by September 30, 2026. Godongwana mentioned that the initial withholding was conducted according to legal provisions, which included notifying the South African Local Government Association and Parliament about the intent to take action against non-compliant municipalities.
Hlabisa reiterated that municipalities are receiving assistance through established constitutional and statutory frameworks to boost compliance, reinforce financial management practices, and resolve internal deficiencies. He concluded that the ultimate determination regarding future fund transfers remains the purview of the National Treasury, consistent with the Constitution and relevant laws. The current interventions are designed to help municipalities resolve the issues that led to the July 2026 withholding, thereby mitigating the risk of future disruptions to equitable share transfers.