Picture: Minister of Finance, Enoch Godongwana
By OBAKENG MAJE
22 July 2026 – The Alternative Information and Development Centre (AIDC) has lambasted the National Treasury’s decision to temporarily withhold the July 2026 local government equitable share (LGES) transfers to 69 municipalities. AIDC said more than a quarter of South Africa’s 257 municipalities have been affected by the decision and this will be pretentious towards service delivery.
AIDC spokesperson, Busi Mtabane said National Treasury cited “persistent and serious non-compliance” with the Municipal Finance Management Act (MFMA). Mtabane further said roughly R13.5 billion of the R110 billion 2026/27 LGES envelope was affected.
She further said since then, NT has begun releasing funds to municipalities that met its conditions, while continuing to withhold funds to others. Mtabane added that while it is necessary and urgent to address financial mismanagement and corruption, AIDC argues that this is not the only reason for financial challenges faced by the majority of municipalities in the country.
“Underlying the financial problems is an unsustainable and irrational financing model that is based on the assumption that municipalities can generate 90% of their own income. Overwhelmingly, this is meant to be achieved through service charges and tariffs. This arises from the adoption of the full cost recovery model.
“Nowhere has the full cost recovery model delivered affordable, reliable, universal basic services for the poor. Everywhere it has been applied at scale, it has produced exactly the pattern now visible in South African local government such as rising arrears, disconnections, deteriorating infrastructure and a widening gap between well-resourced and poor municipalities,” said Mtabane.
She said while not unusual, the problem of the full cost recovery model is magnified in a country defined by mass unemployment and entrenched inequality. Mtabane said raising sufficient revenue in this context is a guaranteed impossibility.
“The outcome is that most municipalities find themselves with very little funding to cover operational expenses. In such cases, withholding of funding is not only a false solution, but it also punishes the poor.
“As a result of the withholding of the equitable share transfers, many households will not receive the free basic services that they are dependent on. Furthermore, in the long term the measures taken by NT will not result in a fundamental change to the unsustainable financial situation that municipalities find themselves in,” she said.
However, the Minister of Finance, Enoch Godongwana has defended his department’s decision. Godongwana said they have temporarily withheld the equitable share transfers to selected municipalities to instill fiscal discipline and ensure that public money is properly managed.
“We doing this to ensure that unauthorised, irregular, fruitless and wasteful expenditure (UIFWE) is addressed and municipal officials and office-bearers are held accountable where required by law.
“The decision follows persistent and serious non-compliance with the Municipal Finance Management Act (MFMA) and its supporting regulations, despite support provided by the National Treasury through guidance, engagement, and formal or informal communication,” he said.
Godongwana said the selected municipalities are Buffalo City, Nelson Mandela Bay, Makana, Sundays River Valley, Inxuba Yethemba, Port St Johns in Eastern Cape, Mangaung, Letsemeng, Kopanong, Mohokare, Xhariep District Municipality, Masilonyana, Tokologo, Matjhabeng, Nala, Dihlabeng, Nketoana, Maluti-a-Phofung, Phumelela, Mantsopa, Ngwathe, Mafube in Free state.
He said this includes City of Johannesburg, Emfuleni, Lesedi, Sedibeng District Municipality, Merafong City and Rand West City in Gauteng and iMpendle, uMzinyathi District Municipality, Newcastle, eMadlangeni, Amajuba District Municipality, AbaQulusi, uMkhanyakude District Municipality in Kwazulu Natal.
“Affected municipalities in Limpopo are Mopani District Municipality, Musina, Thabazimbi, Modimolle-Mookgopong, Fetakgomo Tubatse and Victor Khanye, Emakhazeni, Nkomazi in Mpumalanga.
“In Northern Cape, Kamiesberg, Khâi-Ma, Ubuntu, Umsobomvu, Emthanjeni, Renosterberg, Thembelihle, Siyathemba, !Kai !Garib, Magareng, Phokwane municipalities were affected, while Madibeng, Kgetlengrivier, Tswaing, Mafikeng, Ditsobotla, Ngaka Modiri Molema District Municipality, Naledi, Mamusa, Dr Ruth Segomotsi, Mompati District Municipality, City of Matlosana, Maquassi Hills, JB Marks in North West were affected.
Godongwana said in Western Cape, Theewaterskloof, Laingsburg, and Beaufort West are affected. He said the municipalities have been given sufficient notice in writing and urged to take measures to change their financial management positions ahead of the withholding of funds.
The Guardian 