No more funding without accountability for failing municipalities

We have finally come to the brink of widespread municipal collapse. National Treasury’s decision to withhold the July equitable share transfer from 69 municipalities follows Auditor-General (AG) reports going back more than 10 years, where irregular expenditure (a strong indicator of corruption) increased year after year, with no effective measures taken to stop the rot.

Municipal collapse – now hitting three of South Africa’s eight metros, including Johannesburg, Mangaung and Nelson Mandela Bay – directly reflects a failure of leadership and accountability.

Local government politicians, unfortunately, have largely proven themselves to be a serious part of the problem rather than making any sort of progress in finding solutions.

Read:
Withholding R13.5bn for mismanaged municipalities won’t hit services, says Treasury
WATCH: Godongwana updates on withheld municipal funding

At the time of the 2021 municipal elections, I wrote that municipalities needed the right people in place, warning that the core problem was fundamentally a human resource one and that local government “has not always had the right hands at the till”.

Unfortunately, politicians continued to focus on factional battles, power grabs and vested interests. Service delivery is the casualty, and that always hits underdeveloped areas the hardest.

Read:
Treasury funding freeze puts further pressure on Nelson Mandela Bay
Good governance comes before investment – SBG’s Goolam Ballim

Irregular expenditure doubles

Now, prior to the local government elections in November this year, the AG is making the same argument, with irregular expenditure having roughly doubled.

On Friday, Finance Minister Enoch Godongwana stated that since 2021/22, the affected municipalities have racked up R145.21 billion in cumulative irregular expenditure, R40.14 billion of it in 2024/25 alone, together with R118.13 billion in unauthorised expenditure and R24.12 billion in fruitless and wasteful spending.

Nearly half, 116 municipalities, adopted budgets they could not fund.

Auditor-General Tsakani Maluleke presented her audit outcomes 2024/25 report to Parliament’s Portfolio Committee on Cooperative Governance and Traditional Affairs on 24 June 2026.

It states: “The root causes of continued poor audit outcomes and municipal failures can be traced to persistent accountability ecosystem failures at multiple levels. Our audits again confirmed that accounting officers, senior managers, mayors and councils are not doing what legislation requires of them or they are not effective in performing these duties.”

Read:
Godongwana withholds July funds to Jhb, 70 municipalities nationwide
Treasury tightens public purse on red-flagged municipalities

She recommends that political parties prioritise the capability and integrity of the candidates they put forward as councillors and mayors, saying the calibre of elected leaders will determine whether the incoming administration succeeds where this one did not.

Unfortunately, the bulk of the affected municipalities have largely ignored similar calls being made for more than 10 years. Support can’t be in perpetuity – something had to give and now accountability must become the priority.

‘Joburg is a national problem’

Business has repeatedly made the point that Johannesburg is a national problem: if Johannesburg fails, the consequences ripple through the entire economy.

Johannesburg’s mayor, Dada Morero, briefed the media on Wednesday. He acknowledged that more needs to be done to manage the city’s cash flow and revenue performance, and said its 2026/27 budget had been certified as funded.

However, he also said the city was not in crisis. That is hard to square with the numbers. Treasury requires municipalities to hold 32 days of cash cover, and Johannesburg currently has only 12.

Read:
Don’t write off Joburg yet, says Morero
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Funded budget masks Joburg’s deeper financial problems

Its historical backlog of unauthorised, irregular, fruitless and wasteful expenditure stands at about R23 billion. That is an emergency situation, especially in the face of the city’s arrears of about R3.7 billion to Eskom and R1.2 billion to Rand Water, according to Treasury’s figures.

The precedent for Treasury’s move is encouraging. Last year, it imposed the same measure on 75 municipalities, withholding their equitable share transfers over the same kind of non-compliance, and all 75 had their funds released by early August once conditions were met.

Release, though, is not automatic. Treasury pays out in tranches: a municipality must first submit a signed payment agreement with a creditor such as Eskom or Rand Water; Treasury then releases the amount owed to that creditor directly, and the remaining balance follows only once proof of payment is provided.

Johannesburg must also cut its unauthorised, irregular, fruitless and wasteful expenditure balance by 25% by 30 September.

Read:
Joburg to pay R2.4bn in debt to get R3.6bn funding reinstated
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Who carries brunt of municipal failure?

The cost of municipal failure falls hardest on those least able to carry it. Larger businesses can install generators, sink boreholes and buy insurance against the risk of state failure. This is costly but often necessary.

Smaller businesses often cannot carry such costs, and some have had to close or are at risk of doing so simply because of interrupted electricity or water supplies, on top of the fast-rising costs of electricity, water and other municipal services.

But, as is so often the case with state failure and misgovernance, it is poor households and rural communities that suffer the most.

They are the ones queuing for water tankers, with their children falling ill from failing sanitation or unable to complete schoolwork for lack of electricity.

We have allowed this to become normal and it should not be.

South Africa cannot build a competitive economy on the back of collapsing municipalities. The AG has told us where the failure sits and Treasury is now showing what the consequences are for failing to address the problems.

Read: Withholding R13.5bn for mismanaged municipalities won’t hit services, says Treasury

This municipal crisis accentuates the urgent need to drive on with general municipal reform, which is part of Operation Vulindlela’s phase 2 agenda. That achieved some momentum in May when the Department of Cooperative Governance and Traditional Affairs gazetted the draft revised White Paper on Local Government in May 2026 for public comment.

Achieving the required turnaround at so many ailing municipalities is a massive challenge, but it is incredibly important that we see it through, and organised business will continue supporting the process.

Political parties should seriously contemplate this crisis when putting forward candidates for councillors and mayors in the November local elections: the quality of a party’s full candidate list is important.

Residents have been bearing the brunt of political choices, with candidates wholly unsuited to their responsibilities, for far too long. Voters have the power to change this in November; they should demand that the candidates themselves have the calibre and integrity our municipalities so badly need.

Read:
Operation Vulindlela 2.0: Ramaphosa targets municipal reform
Business backs Operation Vulindlela in tackling SA’s structural challenges

Busi Mavuso is the CEO of BLSA