By Lehlohonolo Lehana.
The National Treasury has revealed that it will release the remaining municipal funding withheld from 69 municipalities by 31 July, despite failing to meet compliance requirements.
Minister of Finance, Enoch Godongwana made an announcement during a joint briefing with the Minister of Cooperative Governance and Traditional Affairs, Velenkosini Hlabisa.
The Municipal Equitable Share is an unconditional allocation made to municipalities in terms of the Constitution and the annual Division of Revenue Act.
It is intended to support municipalities in performing their constitutional functions and to assist them in providing basic services to communities, particularly poor and vulnerable households.
On 7 July 2026, National Treasury announced the temporary withholding of the July 2026 Municipal Equitable Share transfers to 69 municipalities across all nine provinces.
The decision followed persistent and serious non-compliance with Municipal Finance Management Act (MFMA) and related regulations, despite previous support, guidance and engagements provided to municipalities.
Godongwana said, 20 municipalities have already received their full allocations, while the remaining 49 municipalities will receive their outstanding funds starting Friday.
Treasury approved the release of R7.1 billion in previously withheld allocations, while warning future funding depends on improved compliance.
He said municipalities “are not off the hook,” and that they would be “required to perform between now and the second tranche.”
“The release must accordingly be understood as a conditional release intended to protect basic service delivery while requiring affected municipalities to correct the serious weaknesses identified through the Section 216 subsection two processes,” said Godongwana.
“Each municipality will receive a letter informing that municipality what conditions attached, what it is going to do between now and the next tranche. We will also send similar letters to the MECs in each province and the premier of that province to be able to work with us in assisting those municipalities so that, come the next tranche, there will be no need to withdraw their equitable share.”
The minister also touched on the issue of municipalities not paying salaries, particularly in the Free State.
“You must understand that in some municipalities, even if we didn’t take this action, they would still have a challenge. Particularly in the Free State, you will recall one of the municipality’s accounts was confiscated by a pension [fund] because the pension went to court and won,” said Godongwana.
He also spoke about Masilonyana Municipality in the Free State. “As of Friday, all other municipalities had done agreements with the pension [funds] in order to have a payment agreement with the municipalities, [but] Masilonyana had not done that.”
Godongwana said R1.7 billion was owed to pension funds by the end of February, and R1 billion was owed by the Free State. “So we need to think carefully when we talk about Free State. Free State has got 21 municipalities. In the list, they had 16, which means only five municipalities were not as affected.”
Hlabisa said,” We are going to work together to ensure that we provide support where it is necessary, because the truth is, we are at the tail end of the term of these councils. And we shouldn’t allow a situation that will collapse them before the 4th of November.”
“The new councils, when they take over after November, there will be little time before they receive the second equitable share, and the current council will need to take full responsibility in responding accordingly in every communication that will be directed to them, and we want to urge our municipalities.”
Hlabisa highlighted that unfunded budgets must come to an end.
“A municipality that adopts an unfunded budget is committing lies to the public because you say I’m going to spend the money I don’t have,” he said.
It raises speculation that some municipalities were not able to pay salaries because Treasury withheld their equitable shares. Hlabisa said this emanates from passing unfunded budgets.
He added that going forward they are going to ensure that “no municipality passes an unfunded budget. [Cogta and Treasury are going to] ensure that you spend and you plan according to the money you have; that would be number one.”
The South African Municipal Workers Union (Samwu) has welcomed the decision to release funds to the rest of the municipalities; however, it cited the decision to withhold the funds as “reckless”.
“We simply cannot move on as though nothing happened. The decision to withhold these allocations in the first place was reckless, ill-conceived and devoid of any appreciation of the realities confronting municipalities, workers and communities.”