The Minister of Finance, Enoch Godongwana, has notified his Cooperative Governance and Traditional Affairs (CoGTA) counterpart, Minister Velenkosini Hlabisa, that his department intends to withhold the July 2025 equitable share allocation from 39 municipalities across the country for violating constitutional provisions in managing their finances.
In the letter dated 30 June 2025, obtained by the African Times, Godongwana told Hlabisa that these municipalities owe water boards, have failed to pay pension funds and medical aid schemes for employees, and have outstanding debts to SARS and the Auditor-General. Additionally, they have adopted unfunded budgets, which is against the law.
Most of the municipalities fingered by Godongwana are run by the ANC, and they include Emfuleni in Gauteng, Masilonyana, Nkeotana, and Phumelela in the Free State, Mamusa, Mafube, Naledi and Ditsobotla in the North West.
“If, within 7 days of the NT (National Treasury) letter addressed to the municipality, any of the 18 municipalities fail to provide proof that it has fully paid the outstanding amounts owed to the respective Water Board(s) per the 31 May 2025 MFMA section 41 statement(s), the Local Government Equitable Share (LGES) of that municipality will be stopped and only be released to the municipality in portions with conditions. The conditions describing that the first amount of the withheld equitable share to be released and strictly used to pay water board current accounts and provide evidence to the NT in a form of a proof of payment.
“Should this condition be met then the second amount of the equitable share will be released and strictly used to honour any arrears owed in terms of a valid repayment arrangement with the water board and provide evidence to the NT in a form of a proof of payment. Should this condition be met then the July 2025 tranche of the LGES will be released with its own conditions until such time that all outstanding water debt has been resolved,” Godongwan said in the letter.
The municipalities further risk losing their entire allocation for the 2025-2026 financial year should they fail to meet the first two conditions or to submit the evidence that SARS, pension funds and other relevant statutory third parties have been paid. The National Treasury will approach Parliament to endorse stopping all LGES transfers due to persistent non-compliance.
“A similar approach will be followed for the municipalities that persist with unfunded budgets. Furthermore, all 39 municipalities will be required to provide evidence that SARS, Pension and other staff benefits deducted from salaries of municipal officials have been paid over to the appropriate institution within the prescribed period. It should be noted that the above measure is one of several options that will be instituted as part of the wider government intervention in the 39 municipalities for a sustainable solution.
“The measures include the possible placement of some of the 39 municipalities under section 139(5) Intervention of the Constitution, which is an appropriate mode required to deal with the challenges of this nature.”
Godongwana gave Hlabisa seven days to motivate why this measure should not be implemented. Hlabisa’s spokesperson, Pearl Maseko Binqose, said the Minister has responded to Godongwana’s call to make an input, but did not disclose what he said.
