South Africa to Release $396 mln in Withheld Municipal Funds Under Strict Compliance Conditions

July 30, 2026
By Mintesinot Nigussie

South Africa will release 7.1 billion rand in previously withheld equitable share allocations to 49 municipalities on July 31 under a compliance regime that ties the funding to governance reforms and financial oversight, parliamentary committees said. The decision is intended to ensure the continued delivery of basic municipal services while requiring affected municipalities to address deficiencies identified through the Section 216(2) constitutional process. The National Treasury and the Department of Cooperative Governance and Traditional Affairs (COGTA) announced the move during a joint media briefing on Tuesday.

Parliament's Portfolio Committee on Cooperative Governance and Traditional Affairs and the Standing Committees on Public Accounts, Finance and Appropriations said they support the conditional release, arguing that residents should not bear the consequences of failures by municipal administrations. Finance Minister Enoch Godongwana said the funds would be transferred only under conditions requiring municipalities to correct governance weaknesses while maintaining essential services.

The compliance programme will require municipalities to submit progress reports between September 30 and November 30, 2026, detailing measures taken to improve governance, investigate irregularities, recover financial losses, pursue disciplinary action and, where warranted, initiate criminal proceedings. The programme will involve the South African Local Government Association, provincial governments, premiers, provincial treasuries, municipalities and provincial authorities responsible for finance and cooperative governance.

Zweli Mkhize, chairperson of the Portfolio Committee on Cooperative Governance and Traditional Affairs, said the release of funds should not diminish accountability for officials and public office-bearers responsible for governance failures. "We are encouraged that service delivery, particularly to indigent households, will be protected," Mkhize said, adding that the accompanying compliance measures should ensure those responsible for municipal failures are held accountable. The committees also backed plans by National Treasury and COGTA to strengthen early-warning mechanisms and expand support for municipalities experiencing financial distress.

Songezo Zibi, chairperson of the Standing Committee on Public Accounts, welcomed the government's commitment to eliminate unfunded municipal budgets and reduce unaffordable and non-essential expenditure with support from National Treasury, COGTA and provincial institutions. COGTA Minister Velenkosini Hlabisa said the number of municipalities operating with unfunded budgets has declined from 113 to about 76. Parliament endorsed the government's objective of eliminating unfunded budgets over the next two years. Lawmakers also welcomed plans to apply similar enforcement measures to national and provincial government departments that owe money to municipalities, saying accountability should extend across all spheres of government. The National Treasury has submitted to Parliament a report on the implementation of Section 216(2) of the Constitution. The committees said they will assess whether the revised approach succeeds in protecting municipal services, supporting financially distressed municipalities and strengthening accountability across local government.

Source: FSX Business News