WATCH | Johannesburg among municipalities facing a grant freeze over wasteful spending

The National Treasury has temporarily withheld its July equitable share transfers to 75 municipalities, including the City of Johannesburg, as councils continue to grapple with more than R145bn in irregular expenditure and R24bn in fruitless and wasteful spending.

The move, announced on Tuesday, affects municipalities in all nine provinces after the Treasury found persistent failures to comply with the Municipal Finance Management Act (MFMA) despite years of support, training and repeated warnings.

Among the municipalities affected are the City of Johannesburg, Emfuleni, Rand West City and Sedibeng district municipality in Gauteng; Mangaung and Matjhabeng in the Free State; Buffalo City and Nelson Mandela Bay in the Eastern Cape; as well as several municipalities in KwaZulu-Natal, Limpopo, Mpumalanga, the North West, the Northern Cape, and the Western Cape.

The Treasury said the temporary withholding of funds is intended to enforce fiscal discipline and ensure municipalities properly manage public money.

“The decision follows persistent and serious non-compliance with the MFMA and its supporting regulations despite support provided by the National Treasury through guidance, engagement, and formal or informal communication.

“The municipalities have been given sufficient notice in writing and urged to take measures to change their financial management positions before the withholding of funds.”

The Treasury further allowed the municipalities to explain why their transfers should not be withheld before the decision was implemented.

It said the measure is corrective rather than punitive, adding it does not expect the short-term withholding to affect service delivery.

According to the auditor-general’s 2024/2025 Consolidated General Report on Local Government Audit Outcomes, municipalities have accumulated R145.21bn in irregular expenditure since the 2021/2022 financial year, with R40.14bn incurred during the 2024/2025 financial year alone.

The report also found municipalities recorded R24.12bn in fruitless and wasteful expenditure over the same period, while unauthorised expenditure reached R118.13bn.

The Treasury said it has spent years supporting municipalities through MFMA circulars, one-on-one engagements and training programmes.

“Despite these support interventions, many municipalities are still failing to comply with the provisions of the MFMA and its supporting regulations insofar as they relate to adopting funded budgets and ensuring that statutory commitments are met.

“Non-compliance with the legislation is not only a dereliction of fiduciary duties, but it is also threatening the financial sustainability of bulk suppliers [water boards and Eskom].”

Budget discipline has also deteriorated, with 116 municipalities adopting unfunded budgets during the 2024/2025 financial year, up from 113 the previous year.

Municipal debt continues to mount, with councils owing R3.4bn in interest to Eskom and R1.21bn to water boards by the end of the 2024/2025 financial year.

The Treasury criticised municipalities for failing to investigate irregular expenditure through municipal public accounts committees, as required by law.

“In addition, some of the affected municipalities have also failed to show that consequence management is being implemented, including on a timely basis. This includes referrals to disciplinary boards, investigations, disciplinary actions, recovery steps and criminal referrals where required.”

The Treasury said transfers will resume once municipalities meet the required conditions and provide proof that they have addressed the identified shortcomings.

Sowetan