The National Treasury’s decision to temporarily withhold grant funding from Joburg and 68 other municipalities might be the bitter pill local government has long needed to swallow.
Finance minister Enoch Godongwana has fired several warning shots at errant councils for mishandling their finances. This week he announced that the July funding from the Treasury to support municipalities’ operational activities is being withheld to “instil fiscal discipline and ensure that public money is properly managed”.
Transfers will resume once municipalities cut irregular, fruitless and wasteful spending by at least 25% by the end of September and sign payment agreements with creditors, including Eskom and water boards.
“Maybe this is the shock to the system that they think is necessary,” says Chris Hattingh of the Centre for Risk Analysis. The broader signal is also positive. The Treasury’s willingness to act — against an ANC-run metro and in the months before a local government election — reinforces its independence, and shows investors the country is fiscally credible.
However, the mere withholding of funds is unlikely, on its own, to fix what ails the country’s 257 municipalities. Only 39 of them achieved clean audits in 2024/2025. Fruitless and wasteful expenditure has run up to R24.1bn since 2021.
“You also need to provide the right kind of people, the upskilling, the support from national departments and provincial governments,” he adds.
Local government is at the coalface of service delivery, and collapsing infrastructure drives up costs for business and deters investment.
Nowhere are the stakes higher than in Joburg, which Moody’s this week reaffirmed at three notches below investment grade. It did move its outlook to positive — not because governance had improved, but because it finally published its financial statements, prompting the JSE to lift a suspension on its bonds. Joburg contributes roughly 15% of national output.
“All these municipalities — if they don’t function, it really puts paid to all the talk of economic growth and job creation,” says Hattingh. “If they don’t provide services, if they waste the revenue they get from businesses and households, then it’s very difficult for businesses to operate in South Africa.”
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