National Treasury will directly deduct money from national and provincial departments that owe billions of rands to struggling municipalities, Finance Minister Enoch Godongwana announced on Friday.
Delivering the department’s budget vote speech in Parliament, Godongwana revealed that provincial departments owe municipalities more than R14 billion, while national departments have outstanding debt of R8.2 billion.
“Municipalities have consistently raised concerns that where they owe organs of state, National Treasury deducts funds directly from municipal allocations. However, the same principle has not been consistently applied where national and provincial departments owe municipalities outstanding amounts,” the minister said.
“Consequently, National Treasury has taken a decision to deduct monies from national and provincial departments to settle outstanding debts owed to affected municipalities.”
Municipalities themselves will remain under scrutiny. Treasury will continue to invoke Section 216(2) of the Constitution to withhold funds from municipalities that fail to adopt funded budgets or violate financial management laws.
“Municipal unauthorised, irregular, fruitless and wasteful expenditure remains deeply concerning. Accountability and consequence management remain critical to restoring public confidence in local government,” Godongwana said.
The minister said reform of local government remains an urgent priority as municipalities continue facing infrastructure, governance and financial sustainability challenges. Reforms being implemented relate to the local government funding model, metro trading services, infrastructure delivery systems, municipal financial sustainability, and budget and grant reforms.
Water and healthcare infrastructure
Government is moving towards a coordinated and performance-driven approach focused on infrastructure rehabilitation, maintenance and long-term sustainability for water infrastructure. The strategy aims to ensure that every rand invested improves water availability, water quality and financial sustainability.
Godongwana said government continues spending significant resources responding to water leaks and system failures, rather than addressing the root cause – ageing and dilapidated water infrastructure. He added that the current water funding landscape remains fragmented across multiple grants and funding instruments, limiting coordination and reducing efficiency.
On healthcare, R41 billion has been allocated over the medium term to support health infrastructure programmes, including the rehabilitation and replacement of dilapidated facilities. This includes investments in Dr George Mukhari Hospital, Nelson Mandela Bay Hospital and Victoria Mxenge Hospital.
Economic outlook
The minister noted that heightened geopolitical uncertainty and persistent global trade tensions continue to create challenges for the South African economy, leading to increased costs for fuel, fertiliser and shipping.
“These developments are intensifying cost-of-living pressures across economies and compounding inflationary pressures, with inflation reaching a concerning four per cent,” he said.
Over the last three months, Treasury has made an intervention to ease the burden on consumers by announcing a temporary reduction in the general fuel levy, which has cost the fiscus approximately R17.2 billion.
Despite global vulnerabilities, Sub-Saharan Africa is projected to grow by 4.3 per cent, while South Africa’s economy is projected to grow by 1.8 per cent over the medium term.
