Finance Minister Enoch Godongwana stated that the responsibility for the effective use of public resources lies with all municipalities, which must demonstrate that funds are being used for the benefit of the population.
Presenting the Medium-Term Budget Policy Statement for 2026, Godongwana informed parliamentarians that while citizens interact most directly with the state at the local level, the financial and operational performance of many municipalities remains weak.
He emphasized that such a situation is unacceptable because it negatively affects the provision of basic services, undermines economic activity, and reduces public trust.
Godongwana also noted that increased funding has helped alleviate fiscal pressure in municipalities, adding that the issue should now concern not only resources but also achieved results.
The Minister stated that the priority is improving financial management, strengthening the administrative apparatus, and eliminating losses. He specified that every rand transferred to municipalities must lead to noticeable improvements in people's daily lives, including reliable water supply, functioning sanitation, well-maintained roads, and safe, lit public spaces.
Furthermore, municipalities are encouraged to reinvest revenue from water, electricity, and waste disposal services into infrastructure supporting these services. Godongwana demanded that municipalities manage the tariffs they set for residents for basic services more competently.
According to a municipal finance review conducted by the ministry, most municipalities have sufficient funds for current operations, but they spend too much on operating expenses. This leads to insufficient provision for long-term investment in infrastructure and its maintenance.
Godongwana reported on measures to improve revenue collection, such as the implementation of smart meters. In addition to the allocated 2 billion rands, another 3 billion rands will be added to the medium-term expenditure framework for wider deployment of smart meters. This is in response to the success achieved in revenue collection in local municipalities such as Sol Plaatje, Kannaland, and Bela Bela.
The Minister warned that he would not hesitate to withhold Equitable Share allocations from municipalities that breach their obligations. In June, the National Treasury suspended payments to 69 municipalities, subsequently releasing funds to those that met specific requirements.
He added that in the medium term, grant conditions will be strictly enforced, and funds will be withheld or redistributed if municipalities fail to comply with requirements, and allocations will be more closely tied to service delivery outcomes.
Godongwana also mentioned that the government intervenes to ensure that national departments, provinces, and other agencies pay debts owed to municipalities after verifying the amounts. As of December 31, 2025, municipalities reported that government bodies owe local government R27.6 billion, with provincial departments owing more than half of this amount.
Meanwhile, the National Treasury is working on amendments to the Municipal Finance Management Act (MFMA). Godongwana informed Parliament that the draft legislation, published for comment, clarifies the duties of accountants, councils, and executive bodies. This draft strengthens the National Treasury's ability to act against financial misconduct and persistent non-compliance, while also protecting accountants who make lawful decisions in good faith. It also strengthens the governance of financially distressed state entities.
The new bill requires municipalities to confirm that their budgets are genuinely funded and introduces mechanisms for investigating financial misconduct and recovering losses, among other things. The proposed changes allow for robust early intervention in accordance with Section 139 of the Constitution, enhance oversight of financial management by the National Treasury, and provide for personal liability of officials, political leaders, and council members for unauthorized, irregular, fruitless, and wasteful expenditure. This serves as a deterrent for councils passing unjustified budgets and creates provisions for more credible budget assessments.