South Africa’s Treasury Withholds R13.5 Billion from Municipal Equitable Share
In July 2024 the National Treasury announced that it would withhold R13.5 billion of the equitable‑share grant intended for 69 municipalities across the country. The amount represents roughly 12 % of the total R110 billion allocated to local government for the 2024/25 financial year. Treasury officials said the move is a targeted effort to enforce compliance with the Municipal Finance Management Act (MFMA) and to address long‑standing patterns of financial mismanagement.
Why the Withholding Was Implemented
According to Ogalaletseng Gaarekwe, Deputy Director‑General for Intergovernmental Relations at the Treasury, the decision follows years of persistent audit failures, repeated irregular expenditure, and non‑compliance with MFMA provisions. Treasury officials cited:
- Consistently qualified or adverse audit opinions in the Auditor‑General’s reports.
- Unauthorised, irregular, fruitless and wasteful spending that has eroded public trust.
- A pattern of municipalities failing to submit credible financial statements on time.
Gaarekwe stressed that the withholding is a “measure of last resort” designed to prod municipalities into improving their financial governance rather than to punish service delivery.
Scope of the Action
The July tranche is the first of three scheduled equitable‑share transfers for the fiscal year, with further payments planned for December 2024 and March 2025. Only 42 % of the full equity share was released for the July period; the remaining amount will be disbursed once municipalities demonstrate satisfactory compliance.
Among the affected municipalities are major metros such as Buffalo City, Nelson Mandela Bay, Mangaung and Johannesburg, where R3.6 billion was withheld. The Treasury said it contacted 99 municipalities identified as non‑compliant on 22‑23 June 2024; only 30 provided explanations that satisfied Treasury’s criteria, leaving 69 to face the funding pause.
Anticipated Impact on Service Delivery
Treasury officials maintain that the withholding will not materially affect day‑to‑day services. They argue that:
- Equitable‑share transfers constitute less than 20 % of most municipalities’ total revenue streams.
- Local governments have alternative sources of income, including property rates, service charges and provincial grants.
- The Treasury’s framework allows for rapid release of funds once compliance evidence is submitted—potentially within a week to a month, depending on responsiveness.
Jan Hattingh, Treasury Chief Director of Local Government Budget Analysis, noted that the intervention has already helped two struggling water boards avoid closure, thereby preserving essential water supply for affected communities.
Response from Municipalities and Stakeholder Bodies
The South African Local Government Association (SALGA) acknowledged the need for stronger financial discipline but cautioned that punitive measures alone cannot resolve the deeper fiscal challenges many municipalities face. SALGA urged the Treasury to pair enforcement with capacity‑building initiatives, such as:
- Training programmes on MFMA compliance and budgeting.
- Technical support for revenue‑enhancement strategies.
- Improved intergovernmental coordination to address structural funding gaps.
Several municipalities have publicly committed to expediting the submission of audited financial statements and corrective action plans in order to regain access to the withheld funds.
Looking Ahead
Treasury indicated that it will continue to monitor municipal compliance closely and will release subsequent tranches only when satisfactory progress is verified. The broader goal, as articulated by Gaarekwe, is to instill a culture of accountability that reduces the need for future interventions.
As South Africa works toward cleaner audits and more reliable public‑finance management, the July 2024 withholding serves as a stark reminder that fiscal discipline at the local level is both a legal obligation and a prerequisite for sustainable service delivery.
