Pretoria: Cooperative Governance and Traditional Affairs (COGTA) Minister Velenkosini Hlabisa has issued a stern warning to municipalities to cease the practice of adopting unfunded budgets, asserting that this approach undermines financial sustainability and misleads communities. During a joint media briefing in Pretoria with Finance Minister Enoch Godongwana, Hlabisa emphasized the importance of budgeting for expenditure that can be financed through available revenue.
According to South African Government News Agency, Hlabisa highlighted that municipalities must take responsibility for ensuring sound financial management, especially as the current term of local government comes to a close with Municipal Elections scheduled for November 2026. He urged municipalities not to burden newly elected councils with severe financial challenges prior to receiving their next equitable share allocation. Unfunded budgets, he noted, are a primary cause of municipal financial distress, leading to failures in meeting obligations to employees, creditors, and key service providers.
Hlabisa stressed the necessity for municipalities to fulfill their financial obligations, including payments to water boards, the South African Revenue Service (SARS), and Eskom. He also called for government departments and provincial governments to settle their debts with municipalities, ensuring the entire value chain functions effectively to prevent similar issues in the future. The Minister announced that the government would collaborate with the South African Local Government Association (SALGA), organized labor, and other stakeholders to identify financially troubled municipalities and intervene before resorting to more severe measures, focusing on improving compliance and support.
Hlabisa acknowledged improvements in municipal financial reporting, noting that only one municipality failed to submit its annual financial statements last year, with the sector achieving a 98% submission rate. The government aims for full compliance by the 31 August 2026 deadline, emphasizing the importance of budgeting within means and addressing statutory obligations.
He called on residents, businesses, and government institutions to pay municipal rates and service charges, underscoring that municipalities rely on sufficient revenue to deliver services. Hlabisa recognized that municipal dysfunction stems from interconnected challenges but expressed confidence that stronger cooperation, improved compliance, and shared accountability will restore financial stability and enhance service delivery.
The Municipal Equitable Share, an unconditional allocation to municipalities, is intended to support their constitutional functions and assist in providing basic services. However, on 7 July 2026, the National Treasury announced the temporary withholding of the July 2026 Municipal Equitable Share transfers to 69 municipalities across all nine provinces due to persistent non-compliance with the Municipal Finance Management Act (MFMA) and related regulations, despite previous support and guidance.