---
title: "Treasury again cracks transfers whip over errant municipalities"
description: "It is deeply worrying that the situation has reached this point. The Treasury has clearly hit the limits of its patience, forcing it to draw a line in the sand. Years of support and guidance have been flushed down a drain of negligence"
type: "NewsArticle"
publisher: "Daily Maverick"
site: "https://www.dailymaverick.co.za"
section: "LINE IN THE SAND"
author: "Ed Stoddard"
author_url: "https://www.dailymaverick.co.za/author/ed-stoddard/"
canonical_url: "https://www.dailymaverick.co.za/article/2026-08-04-treasury-again-cracks-transfers-whip-over-errant-municipalities/"
published: "2026-08-04T19:56:29"
lang: "en-ZA"
word_count: 866
---

# Treasury again cracks transfers whip over errant municipalities

> It is deeply worrying that the situation has reached this point. The Treasury has clearly hit the limits of its patience, forcing it to draw a line in the sand. Years of support and guidance have been flushed down a drain of negligence

By Ed Stoddard · Published 4 August 2026, 21:56 SAST

## Key points
- Treasury DG Duncan Pieterse warned municipalities it will again withhold equitable share transfers if they don’t fix chronic financial and governance failures — a blunt ‘riot act’ at the Absa conference.
- The move follows June–July action that forced councils to pay R4.2bn to creditors (notably water boards) after Vaal Central and Magalies Water teetered on the brink of collapse.
- Triggering problems include unfunded budgets, unpaid creditors and pensions, unauthorised/irregular/wasteful spending and absent consequence management — withholding can last 30 days unless Parliament permits longer.
- Treasury pitches longer-term fixes: a R54bn Metro Trading Services Reform to run water/electricity as utilities and new public-private partnership regulations. Political stakes rise ahead of November’s local elections, with 162 municipalities in distress.

## Content

Delinquent municipalities beware: the Treasury again stands ready to withhold equitable share transfers if they don’t clean up their act.

That was the message from Director-General Duncan Pieterse on Tuesday in a speech delivered at the Absa Consumer Conference – effectively a reading of the riot act.

Last week, Finance Minister Enoch Godongwana released transfers that had been withheld for July after affected municipalities scrambled to settle bills, with R4.2-billion paid to creditors by 31 July.

“Despite the release of the equitable share, municipalities must still correct the serious financial and governance weaknesses that have been identified. If they do not, the National Treasury will follow the necessary steps to withhold equitable share transfers again in the future,” Pieterse said in his prepared remarks.

[LOCAL GOVERNANCE

Treasury turns off the tap for 69 SA municipalities over rotten money management

July 7, 2026 ![Image](https://cdn.dailymaverick.co.za/i/-0TpuitPxBgZTkcrerXENGTj2KY=/450x0/smart/file/attachments/orphans/neesa_Tap_690480.jpg)](https://www.dailymaverick.co.za/article/2026-07-07-treasury-turns-off-the-tap-for-69-sa-municipalities-over-rotten-money-management/)

### **Source of the trouble**

The DG provided some background to these measures – and they stemmed from water woes.

In September 2024, Vaal Central Water and Magalies Water faced imminent bankruptcy. The two boards, which supply water to the Northern Cape, Free State and North West, had stopped paying for raw water due to non-payment by municipalities.

![BM-Ed-Treasury/Municpalities](https://cdn.dailymaverick.co.za/i/lzzeD2LNc4aEhxnf9-tpMD6k_zA=/200x100/smart/filters:strip_exif\(\)/file/attachments/orphans/AFP_20120617_Par7171062_v2001_HighRes_SafricaHistoryTownSociety_381821.jpg)

*A woman runs water from a tap in the street to do her laundry in Alexandra township, Johannesburg. (Photo: Alexander Joe / AFP)*

“This not only threatened to interrupt water supply to three provinces, but it threatened the financial viability of the whole water sector,” Pieterse said.

To prevent a financial tsunami from engulfing the sector, the offending municipalities had their equitable share payments withheld on condition that they settle their debts with the water boards.

“This action saved those boards from collapse and ensured that residents in Northern Cape, Free State and North West continued to receive water,” Pieterse said. It also provided the template for the action taken in June on a wider scale.

In the lead-up to that, failing municipalities had been warned that this would happen.

“These municipalities adopted unfunded budgets, they failed to pay creditors (such as water boards) or third-party contributions (such as employee pension contributions), they did not reduce unauthorised, irregular, fruitless and wasteful expenditure and they did not implement consequence management against implicated officials,” Pieterse said.

### Warnings ignored

But they failed to heed the warnings and mend their ways. So in June, the trigger was pulled.

“Our action was intended as a corrective measure to get errant municipalities to change their behaviour and put proper governance and oversight in place. It followed years of support, guidance and training by the National Treasury to help struggling municipalities turn themselves around,” the DG said.

Such measures do have their limits. The equitable share transfers cannot be withheld for more than 30 days without parliamentary approval, and some offending municipalities can probably wait that out without blinking.

But if it becomes frequent – or if parliamentary approval is sought and sanctioned to withhold such funds for longer periods – errant municipalities will have to blink.

### Patience runs dry

It is deeply worrying that the situation has reached this point and the Treasury has clearly hit the limits of its patience, forcing it to draw this line in the sand. Years of support and guidance from the Treasury have been flushed down a drain of negligence and mismanagement with the stench of corruption hanging in the air.

As Pieterse also noted, “Withholding equitable share transfers can only be a short-term fix.”

Longer-term and viable solutions include the R54-billion Metro Trading Services Reform to boost infrastructure investment.

![BM-Ed-Treasury/Municpalities](https://cdn.dailymaverick.co.za/i/mCm0O0Dr-7WSN21L-3LcJlE7goU=/200x100/smart/filters:strip_exif\(\)/file/attachments/orphans/GF20000103538_309730.jpg)

*A woman fills a bucket at the last tap with running water in their village after water to the other communal taps was cut off due to drought in Qwabe, north of Durban. (Photo: Reuters / Rogan Ward)*

“Little of the revenue they (metros) collect from trading services such as water, electricity and sanitation is reinvested in the infrastructure needed to support the delivery of those services,” Pieterse said.

“The reform we have embarked on will shift to a utility model for water and electricity, where these services will be run like businesses and revenue will be reinvested into the maintenance of critical infrastructure.”

In short, the cadres will be cut off from the trough.

### Public-private partnership regulations

Such reforms will require the private sector to ensure the services are run like a business, and Pieterse said that the Treasury would soon “... publish dedicated public-private partnership regulations for local government to facilitate private sector participation in the delivery of basic services to residents”.

That should be a game-changer, though one nagging concern is that tenders and contracts for private-sector service providers could flow to cronies. But the regulations will hopefully have stringent preventive clauses. The Treasury knows this terrain well.

Politically, the timing of these measures is of more than passing interest, with the local elections scheduled for November. More than half of South Africa’s municipalities – 162 – are in financial distress. A day of reckoning is looming for many an underperforming official.

A political shakeup in November may be required to allow these reforms to firmly take root. Meanwhile, the Treasury is taking a carrot-and-stick approach. The delinquents cannot say they weren’t warned. **DM**