CoGTA, Treasury plan sanctions for departments that fail to pay municipalities

The Department of Cooperative Governance and Traditional Affairs (CoGTA) and the National Treasury are drafting a Cabinet memorandum that may lead to withholding funds from national and provincial departments that repeatedly fail to pay municipalities. This was disclosed by CoGTA Minister Velenkosini Hlabisa in response to parliamentary questions from IFP MP Zuzifa Buthelezi, following the National Treasury's withholding of equitable share allocations to 69 municipalities in July. The department owed municipalities R15 billion in unpaid property rates and services.

Hlabisa stated that there are existing laws that allow municipalities to impose property rates and surcharges on service fees. Both national and provincial departments are legally obligated to settle all contractual obligations and pay owed funds within an agreed timeframe. Hlabisa further explained that his department, with the National Treasury, is pursuing reforms to ensure accountability for financial obligations across all levels of government.

The key mechanism is the creation of a draft Joint Cabinet Memorandum aiming for Cabinet approval to use Section 216(2) of the Constitution against national and provincial departments persistently failing to meet financial obligations to municipalities.

The proposed reform aims to ensure that departments uphold their accountability regarding the payment of rates and services. The draft memorandum is being finalized, with inputs sought from the Department of Public Works and Infrastructure, which manages state-owned properties and contributes significantly to the debt owed to municipalities.

Hlabisa also mentioned strengthening intergovernmental coordination between CoGTA and the National Treasury to identify, verify, and monitor debt owed by organs of state to municipalities, with a view to considering appropriate enforcement measures.

In contrast, Finance Minister Enoch Godongwana announced that the withholding of allocations to the affected municipalities has been suspended. The National Treasury released the funding on July 31, 2026, as they cannot withhold the Equitable Share for more than 30 days without parliamentary approval. Godongwana clarified that this suspension followed an assessment that included monitoring compliance by the affected municipalities after the temporary withholding of transfers.

The municipalities were supported by the National and Provincial Treasuries as they implemented corrective measures. Targets, activities, milestones, and timelines were communicated to the municipalities, with a deadline of September 30, 2026, for reporting meaningful progress.

Godongwana emphasized that the withholding of allocations was done in accordance with legislative provisions and that the municipalities were being supported through constitutional and statutory mechanisms to enhance compliance, improve financial management practices, and address their weaknesses. The final decision on future transfers remains under the National Treasury's responsibility, as per the Constitution and relevant legislation.

The ongoing interventions aim to assist municipalities in resolving the issues that led to the July 2026 withholding decision, thereby minimizing the risk of future interruptions to equitable share transfers.