National Treasury has decided to release the remaining July 2026 equitable share allocations that were withheld from 69 municipalities, citing the need to protect communities from the consequences of municipal failures.

Finance Minister Enoch Godongwana, speaking alongside Cooperative Governance and Traditional Affairs Minister Velenkosini Hlabisa on Tuesday, announced that the funds would be released despite affected municipalities not fully meeting financial management requirements.

“National Treasury must balance its constitutional responsibility to enforce financial management requirements with the need to avoid communities carrying the immediate consequences of failures by municipal institutions and officials,” Godongwana said.

Why funds were initially withheld

Treasury took the unprecedented step to withhold municipal allocations after some municipalities continued to adopt unfunded budgets, accumulate unauthorised, irregular, fruitless and wasteful expenditure (UIFWE), and fail to meet statutory obligations to Eskom, water boards, SARS, the Auditor-General and pension funds.

The withholding action, taken in terms of section 216(2) of the Constitution and the Municipal Finance Management Act of 2003, was meant to force compliance with financial management regulations.

As of Tuesday, 20 of the initial 69 affected municipalities had received their full equitable share, 21 received partial allocations, and the remaining 28 had not received any allocations.

Conditional release with strict requirements

Godongwana made it clear that the decision to release the funds does not mean municipalities have satisfied financial management requirements. The release is conditional and intended to protect basic service delivery whilst requiring municipalities to correct serious weaknesses.

“The equitable share is an important source of funding for basic services, particularly services provided to poor households,” he said.

Treasury had withheld the funds for close to 30 days, ending on Monday, 3 August, and decided to release them to avoid adverse short- to medium-term effects on the delivery of basic municipal services.

Compliance deadlines and consequences

Municipalities must now meet strict deadlines to avoid further withholding of funds. By 30 September 2026, affected municipalities must submit their first formal compliance reports with supporting evidence demonstrating achievement of UIFWE processing and reduction requirements.

By 31 October, municipalities must demonstrate processing of matters outstanding as at 30 June through required legal processes. By 30 November, there should be a demonstrable increase in the number of matters that have progressed through UIFWE reduction and disciplinary board processes to conclusion.

Treasury will also send letters to premiers and MECs for Finance and CoGTA with strict conditions for consideration in withholding the December instalment of the equitable shares if municipalities fail to comply.

Municipalities’ progress will be measured in reductions in UIFWE as well as the implementation of consequence management actions. Treasury will assess whether matters have moved through the required investigation, disciplinary, recovery and criminal processes.

“National Treasury remains committed to support municipalities during this period on their road to compliance and to assist municipalities in avoiding another withholding of the equitable share,” Godongwana said.

The next tranches of equitable shares are expected to be disbursed in December 2026 and March 2027.

ALSO READ: Treasury suspends transfers to 69 municipalities over financial mismanagement