South African Local Government Association (Salga) president Bheki Stofile has lashed out at the Treasury’s decision to withhold equitable share allocations to municipalities, saying the move was punitive and “deeply flawed”.
In his opening address at the Salga national executive committee lekgotla held in Cape Town, Stofile said: “One of the most pressing structural threats to developmental local government is the steady erosion of municipal fiscal capacity.
“The withholding of equitable share allocations as a punitive measure against municipalities reflects a deeply flawed policy logic. Municipalities serve as critical governance spaces wherein communities directly experience the repercussions of fiscal resource withdrawal, resulting in a decline in services.”
Business Day reported in January that the number of employers ― including municipalities ― that have defaulted on pension, medical aid, provident and retirement fund contributions has doubled in a year, affecting nearly 600,000 employees with outstanding contributions exceeding R7bn.
According to the Financial Sector Conduct Authority (FSCA), which regulates the country’s financial institutions, the number of defaulters surged from 4,000 in 2023 to 7,700 in 2024 and 15,521 in 2025.
The FSCA has said that in collaboration with the National Treasury, “millions owed to members and retirement funds have been recovered”.
“This was achieved through the strategic withholding of equitable share allocations, compelling municipalities to make the necessary third-party payments,” it said.
Speaking about energy supply, Stofile said municipalities’ rights to reticulate electricity was not negotiable and that local distribution networks were more than infrastructure, “they are lifelines for service delivery and anchors of financial sustainability”.
Municipalities owe Eskom ― which is being unbundled into three entities responsible for generation, transmission, and distribution ― more than R100bn.
“The restructuring of the electricity sector represents one of the most consequential structural reforms in the democratic era. Municipal electricity distribution has historically subsidised core municipal services,” he said.
“Revenue derived from electricity trading has enabled municipalities to fund water provision, waste removal and infrastructure maintenance. Current reform trajectories associated with market liberalisation and energy unbundling risk stripping municipalities of this revenue base.”
The restructuring of the electricity sector represents one of the most consequential structural reforms in the democratic era. Municipal electricity distribution has historically subsidised core municipal services.
— Bheki Stofile, South African Local Government Association president
The Business Leadership South Africa last week said the country’s reform agenda remained on a positive trajectory, showing measurable progress across economic, criminal justice and governance streams, despite some setbacks on energy reforms.
Stofile said the position of the South African Local Government Association, the employer body representing the country’s 257 municipalities, was that reforms must “strengthen municipalities, not sideline them, as their role in providing electricity to communities is both a constitutional mandate and a critical aspect of local governance”.
There was a long overdue need to improve local government funding, said Stofile. With adequate funding from the national fiscus, he said, municipalities would be better equipped to meet their constitutional responsibilities and respond to service delivery matters.
The local government sector lost R17.6bn over the past three years to fruitless and wasteful expenditure.
According to the auditor-general’s local government audit outcomes for 2023/24, there has been a slight increase in councils that received clean audits in 2023/24. A total of 41 of the country’s 257 municipalities obtained clean audits, an increase from 34 in 2022/23.
In 2023/24, 99 municipalities received unqualified audit opinion with findings, down from 110 in 2022/23; 90 received qualified opinions with findings (83 in 2022/23); adverse with findings remained unchanged at six; and 11 municipalities received disclaimers, down from 15 in 2022/23. A total of 10 municipalities had outstanding audits.
Local government’s worsening state has spurred the government to focus the second phase of Operation Vulindlela on fixing councils. Vulindlela is a joint initiative of the Treasury and President Cyril Ramaphosa’s office created in 2020 in a bid to accelerate structural reforms to drive rapid, inclusive economic growth, job creation and improved service delivery.
Addressing ANC supporters during the January 8 celebrations at Moruleng Stadium in North West last month, Ramaphosa said the party had declared 2026 a year of decisive action to fix local government and transform the economy, with the government of national unity having set aside R54bn for service delivery.
The president said to advance the ANC government and South Africa the organisation had identified six tasks for the year.
These included fixing local government and improving basic services; speeding up economic transformation, inclusive growth and job creation; and waging war on crime and corruption, and gender-based violence and femicide.
