CAPE TOWN, Thursday 1 October 2026 — National Treasury is preparing tighter controls over municipal budgets and conditional grants after the 4 November local government elections, with Finance Minister Enoch Godongwana saying government is also considering measures including criminal charges where existing mechanisms fail to stop financial misconduct.
Godongwana told the National Assembly during questions on Wednesday that Treasury would announce measures aimed at preventing municipalities from using conditional grants for purposes other than those for which the money was allocated.
Further details are expected when he tables the Medium-Term Budget Policy Statement on 21 October.
The intervention comes weeks before voters elect new municipal councils and follows Treasury’s decision earlier this year to withhold equitable-share funding from 69 municipalities that failed to meet financial requirements.
Godongwana said government wanted to strengthen enforcement without punishing residents for failures by municipal administrations.
Conditional grants face tighter controls
Conditional grants are transferred to municipalities for specified purposes and cannot simply be redirected towards unrelated expenditure.
Godongwana said Treasury was working with the national departments responsible for transferring grants to strengthen the regulatory framework.
“In certain circumstances, municipalities are actually using the conditional grants incorrectly,” he told MPs.
Treasury will review some of the grants themselves as part of the process, with the outcome expected to feature in the October medium-term budget.
The minister said the objective was to ensure that money allocated for a particular purpose was actually spent on that purpose.
That could have consequences for municipalities that have relied on grant funding while struggling with weak revenue collection, unfunded budgets and growing creditor obligations.
Criminal charges among options being examined
Godongwana said Treasury was also examining stronger enforcement mechanisms.
“We are looking at different instruments which may include laying criminal charges,” he told the National Assembly.
“We are exploring all of those options so that we do not penalise the residents.”
The minister did not announce that criminal proceedings would automatically follow financial non-compliance.
Rather, criminal charges are among the options Treasury is considering as it looks for ways to hold municipal decision-makers accountable without withholding funding needed for basic services.
Any criminal case would require evidence of conduct amounting to an offence and would be subject to the ordinary investigative and prosecutorial process.
69 municipalities had funding withheld
The planned reforms follow a dispute earlier this year over Treasury’s decision to withhold equitable-share allocations from 69 municipalities.
Godongwana said he had not taken the decision lightly.
The equitable share differs from conditional grants because it forms part of municipalities’ constitutionally allocated revenue and helps fund the delivery of basic services.
Treasury acted against municipalities it said had failed to comply with requirements aimed at addressing their financial problems.
Godongwana said most of the affected municipalities had since made progress, with only a smaller group remaining non-compliant.
The experience appears to have contributed to Treasury’s consideration of enforcement mechanisms that target responsible institutions and officials more directly rather than disrupting funding relied upon by communities.
New councils will face funded-budget requirement
The timing of the intervention is significant because new municipal councils will take office after the 4 November local government elections.
Godongwana said Treasury was already developing a process requiring municipalities to provide detailed information on the costs driving their budgets.
“Once new leadership is appointed in the new municipalities, we will ramp up the process,” he said.
New councils will also be expected to operate within funded budgets.
A funded budget is one in which projected revenue and available resources are sufficient to finance planned expenditure, rather than relying on unrealistic revenue assumptions or expenditure that a municipality cannot afford.
Municipal financial distress has become a central governance problem across South Africa, with numerous councils struggling to collect revenue, pay creditors and maintain infrastructure.
Reform coincides with wider local-government overhaul
Treasury’s plans will be implemented alongside a broader restructuring of the local-government system.
Cabinet has approved the Final Revised White Paper on Local Government, 2026, which is intended to address persistent governance, institutional, financial and service-delivery failures across municipalities.
Cabinet also endorsed a time-bound transition-management process jointly involving Cooperative Governance, the Presidency and National Treasury.
Cooperative Governance Minister Velenkosini Hlabisa has instructed his department to develop a 90-day Local Government Transition Plan.
The first 18 months after the election will be used to implement priority reforms, with responsibilities, milestones and links to departmental budgets and annual performance plans.
New councillors are also expected to receive expanded induction covering the reforms.
The combination of Treasury’s financial controls and the revised White Paper means councils elected on 4 November will begin their terms under a substantially intensified national reform programme.
First details due before election
The first major details of Treasury’s intervention are expected before voters go to the polls.
Godongwana is scheduled to table the Medium-Term Budget Policy Statement on 21 October, two weeks before election day.
That statement is expected to outline changes to conditional grants and the regulatory framework governing their use.
The broader municipal-budget intervention will then accelerate once newly elected councils and municipal leadership structures are constituted.
The next council term will therefore begin with Treasury demanding funded budgets, tighter controls over earmarked grants and potentially stronger consequences where municipal financial rules are breached.
