National Treasury said the decision was taken to enforce fiscal discipline and ensure that public money is properly managed. The move aims to address Unauthorised, Irregular, Fruitless and Wasteful Expenditure (UIF&W) and ensure that municipal officials and office-bearers are held accountable.
“The decision follows persistent and serious non-compliance with the Municipal Finance Management Act (MFMA) and its supporting regulations, despite support provided by the National Treasury through guidance, engagement, and formal or informal communication,” National Treasury said.
Prior to withholding the funds, National Treasury provided support and guidance to municipalities on the steps they needed to take to ensure compliance with specific provisions of the MFMA and its regulations.
The equitable share allocation is intended to help municipalities pay for basic services such as water and electricity, as well as fund core municipal administrative functions.
Although municipalities have the discretion to manage these unconditional grants, failure to prioritise the funds for their intended purposes can legally result in the National Treasury withholding transfers — an intervention used when municipalities accumulate severe debt or demonstrate poor financial management.
“For Madibeng, this poses a major risk because the 2026/2027 budget is already under pressure. The municipality relies heavily on transfers, collection assumptions, and improved revenue recovery. Any delay or withholding of grant funding will place further strain on service delivery, creditor payments, infrastructure maintenance, and operational stability,” said VF Plus councillor in Madibeng, Elsa Lourens.
“Because of the high amounts owed in interest to Eskom and water boards, the municipal debt is no longer only a capital debt problem. Interest is now consuming money that should have gone to basic services. Madibeng risks entering a cycle where it pays penalties and interest instead of fixing roads, water leaks, sewerage failures and electricity infrastructure.”
Lourens said the suspension of funds would worsen the political turmoil already affecting the municipality.
“A municipality under financial pressure requires stable leadership, disciplined oversight and quick corrective action. However, political instability, collapsed sittings, factional conflict and weak accountability delay decisions and make it harder to implement Treasury conditions. This creates a direct risk that transfers may remain withheld for longer,” she said.
