Finance minister Enoch Godongwana has threatened to withhold the Joburg metro’s equitable share instalment for July if the mayor fails to scrap a R10.3bn wage offer the council made to city workers threatening to strike last year.
In an explosive letter, which Business Day has seen, Godongwana said he is worried about the city’s financial governance failures and would withhold R8bn, a move that could severely affect service delivery for the city’s more than 6-million residents.
The city is insolvent as revenue collection levels do not meet budgeted targets, and it has an overexpenditure of about R3.9bn on employee-related costs, bulk electricity purchases, inventory consumed and operational costs.
The council’s finances are severely constricted with poor revenue collection resulting in its failure to meet service delivery targets.
It desperately needs the equitable share from the Treasury to enhance service delivery ― especially in an election year.
The city, the country’s financial and economic hub, entered into a politically facilitated agreement (PFA) regarding a R10bn wage agreement with the South African Municipal Workers’ Union (Samwu) late last year, aimed at aligning staff salaries with those of employees in other metropolitan municipalities.
In the deal the metro committed to pay a minimum of R1.2bn and up to a maximum of R2bn by March 2026; a minimum of R5bn and up to a maximum of R6bn by July 2026, and R4.1bn by July 2027.
The wage deal came amid threats by Samwu to disrupt the G20 Leaders’ Summit in Johannesburg in November 2025 by “closing down all the freeways”.
‘Illegally signed agreement’
In his letter, Godongwana orders mayor Dada Morero to “stop proceeding with the implementation of this illegally signed agreement that has the potential to destroy the sustainability of the City of Johannesburg beyond this term of office as well as the negative impact on the national economy at large”.
“Secondly, not only is your adjustments budget not funded in terms of section 18 of the MFMA [Municipal Finance Management Act], but you very well know the city cannot afford this agreement.
“In the event that the city is not willing to remedy the situation with immediate effect, I hereby give you formal notice that the National Treasury will invoke section 216 (2) of the constitution targeting your July 2026 equitable share instalment.”
In the letter dated April 23 and copied to co-operative governance & traditional affairs minister Velenkosini Hlabisa, Gauteng finance MEC Nkululeko Dunga and Jacob Mamabolo, Godongwana said he had observed a series of violations of various legislative and regulatory compliance requirements under the Municipal Finance Management Act “that suggest a deterioration in the city’s governance and overall financial health”.
Morero’s spokesperson Khathutshelo Mulaudzi said the mayor received Godongwana’s letter last week.
“Thereafter, the mayor engaged directly with the minister to discuss the contents of the letter and the issues raised. Both parties have since agreed to convene a formal engagement between the City of Johannesburg and the ministry of finance to address and clarify the matters outlined,” Mulaudzi said.
“The city acknowledges the critical oversight and governance role of the ministry of finance in engaging municipalities on matters of financial sustainability, governance and accountability.
“The executive mayor has formally requested a meeting with the minister and the city is currently awaiting confirmation of the engagement date.”
The letter comes barely nine months after Godongwana wrote a damning letter to Morero demanding a plan to rein in the metro’s unauthorised, irregular, fruitless and wasteful expenditure.
Godongwana had already flagged a crisis of accountability after uncovering R1.4bn in authorised outlays, R22bn in irregular spending and R705m in fruitless and wasteful payments.
In April, Global Credit Rating (GCR), revised the City of Joburg’s ratings outlook from stable to “rating watch negative” over the metro’s delays in finalising its annual financial statements.
The rating watch negative was due to “material uncertainty in the audit process, as highlighted by the continued delay in finalising the annual financial statements for the year ended June 30 2025, which were expected to be released by no later than May 31 2026, Global Credit Rating said.
A rating watch negative meant the city’s credit rating was under review for a potential downgrade in the near term, usually within 90 days. The action indicated increased risks such as deteriorating financial performance, regulatory issues or economic instability.
The municipality has long been plagued by crumbling roads and infrastructure as well as deteriorating water and electricity networks, prompting President Cyril Ramaphosa, during an oversight visit to the city a year ago, to propose the establishment of a Presidential Johannesburg Working Group.
This was part of efforts to address service delivery challenges in a metro responsible for 16% of South Africa’s GDP and employing 12% of the national workforce.
Ramaphosa noted on the visit that the city faced “enormous challenges, ranging from financial and governance instability to rapidly deteriorating infrastructure”.
On Wednesday, ActionSA Gauteng chair Funzi Ngobeni said the contents of the latest letter are alarming.
“The National Treasury warns of deteriorating governance, ongoing noncompliance with financial regulations, severe liquidity pressures, rising creditor obligations and commitments that the city may not be able to sustain financially,” he said.
“Most notably, the minister directly instructs the city to halt implementation of the salary agreement linked to the Politically Facilitated Agreement [PFA], warning that the city cannot afford the commitment in its current financial state.”
Rise Mzansi MP Makashule Gana said Godongwana’s letter reveals a city in a state of “severe financial distress”, characterised by an unfunded 2025/26 adjustments budget, a liquidity crisis as the city owes creditors R25.2bn, “yet only has R3.9bn in cash ― a gap that makes it impossible to meet its basic financial obligations”.
“The city continues to operate on noncompliant, manual or interim financial systems, which prevents transparent reporting. The administration is playing politics and cutting corners to everyone’s demise.
“As a result, the city’s 6-million residents, the city’s employees and the broader business community will continue to suffer from unsafe streets, leaking pipes, uncollected refuse and crumbling roads,” Gana said.
“The minister’s threat to invoke section 216(2) of the constitution, which would withhold the city’s July 2026 equitable share instalment, is a direct consequence of this reckless leadership.”
The city continues to operate on noncompliant, manual or interim financial systems, which prevents transparent reporting. The administration is playing politics and cutting corners to everyone’s demise.
— Makashule Gana, Rise Mzansi MP
Morero had to present “a credible, cash-backed plan to restore the city’s liquidity and ability to deliver services”, while Ramaphosa had to answer for the collapse in financial governance, given that the Presidential Johannesburg Working Group was established to “strengthen governance and financial sustainability. It is clear that his intervention is not working”.
Presidency spokesperson Vincent Magwenya confirmed the president is aware of the Treasury letter to Morero “raising issues linked to alleged breaches” of the Public Finance Management Act. These concerns formed part of the rationale for establishing the working group.
Cosatu Gauteng chair Amos Monyela said: “The refusal to fully implement the PFA, which was adopted to address legitimate grievances regarding wage disparities, demonstrates a blatant disregard for collective bargaining and worker solidarity. This failure to implement the PFA is not just a technicality; it is an economic injustice that leaves municipal workers vulnerable to poverty despite being employed.”
It is unacceptable that the Treasury, under Godongwana, continues to prioritise fiscal austerity over workers’ livelihoods, he said.
He called on the Treasury to “cease its adversarial approach towards workers and honour the agreements made to ensure fair compensation”.
“Cosatu will not stand by while workers are treated as expendable. We call on minister Godongwana to reconsider this hostile stance and fully fund the implementation of the PFA immediately.
“If the minister continues to hold back, Cosatu will escalate this matter to the highest levels of struggle to ensure that workers receive what is rightfully theirs.”
DA Joburg mayoral candidate Helen Zille said the metro’s financial challenges were the reason for its inability to repair or maintain infrastructure, leading to consistent power and water outages, and the failure to fix breakdowns, “resulting in the steady collapse of service provision across the board”.
“Overall, the DA has been warning for more than three years that the city was headed for a major financial crisis. We have also consistently warned in council that the above decisions, alluded to in the minister’s letter, were unlawful and that we would pursue corrective measures under section 32 of the MFMA.
“This means that we will seek to hold all councillors who supported these illegal decisions in council personally responsible for the recovery of the money lost to the city under section 21 (1) of the MFMA, which states that ‘political office-bearers or officials who deliberately or negligently permit such expenditures are personally liable‘.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.