‘We’ll fix this’: Godongwana U-turn on withholding municipal grants comes with caveat

JOHANNESBURG – Finance Minister Enoch Godongwana says National Treasury is prepared to restore funding to municipalities that demonstrate meaningful improvements in financial management, signalling a partial reversal of its decision to withhold billions of rand in equitable share allocations.

However, Godongwana stressed that the reinstatement of funding does not amount to a blanket reprieve. Municipalities that fail to comply with financial regulations, improve governance and address outstanding debts could still face future funding restrictions and additional intervention.

Treasury changes course

Earlier this year, National Treasury withheld portions of equitable share allocations from dozens of municipalities after identifying serious concerns over financial management, governance failures and non-compliance with the Municipal Finance Management Act (MFMA).

The decision affected municipalities struggling with persistent unauthorised expenditure, poor financial controls and growing debt owed to bulk service providers such as Eskom and water boards.

Following engagements with local governments, Treasury has now reinstated funding for municipalities that have taken steps to address the issues raised.

“We’ll fix this”

Speaking on the decision, Godongwana said the objective was never to punish municipalities or deprive communities of essential services.

Instead, he said Treasury’s intervention was intended to encourage municipalities to strengthen governance, improve accountability and place their finances on a sustainable footing.

The minister indicated that municipalities showing genuine progress would receive continued support from national government while remaining subject to ongoing oversight.

Conditions remain in place

Despite restoring grants to several municipalities, Treasury warned that strict conditions continue to apply.

Municipalities will be expected to:

• Improve financial management.
• Reduce unauthorised and irregular expenditure.
• Settle debts owed to Eskom and water boards.
• Submit credible financial recovery plans.
• Strengthen governance and internal controls.
• Improve service delivery.

Failure to meet these requirements could result in further interventions or renewed restrictions on future transfers.

Financial stability remains priority

Godongwana acknowledged that many municipalities face serious financial challenges, including ageing infrastructure, declining revenue collection and increasing operational costs.

He said restoring financial stability requires cooperation between municipalities, provincial governments and National Treasury.

The minister added that technical support would continue to be provided to municipalities experiencing governance and financial management difficulties.

Balancing accountability and service delivery

Treasury maintains that withholding funds is intended as a constitutional mechanism to promote compliance rather than punish residents.

Government says the goal is to ensure that public funds are used responsibly while protecting essential municipal services such as:

• Water supply.
• Electricity distribution.
• Sanitation.
• Refuse removal.
• Road maintenance.

Officials argue that stronger financial controls ultimately improve service delivery and reduce wasteful expenditure.

Municipal leaders urged to act

Godongwana called on municipal leaders to strengthen governance and ensure that public money is spent transparently and efficiently.

He warned that restoring grants should not be interpreted as a return to business as usual, saying municipalities remain accountable for improving financial performance and complying with legislation.

The minister emphasised that taxpayers expect municipalities to deliver reliable services while managing public finances responsibly.

What happens next?

National Treasury is expected to continue monitoring municipalities that previously had funding withheld.

Future equitable share transfers will depend on continued compliance with financial management requirements and demonstrable improvements in governance.

While the decision to restore funding offers short-term financial relief for several municipalities, Treasury has made it clear that sustained accountability and better financial discipline will determine whether local governments continue receiving full financial support from the national fiscus.