Municipal leaders, not vulnerable communities, must face the consequences for financial failure, says WaterCAN

WaterCAN has warned that National Treasury's decision to temporarily withhold the July 2026 equitable sharetransfers from 69 municipalities risks making vulnerable communities pay the price for years of political and administrative failure.

Download the National Treasury media statement and supporting annexures. 

While WaterCAN supports decisive action against persistent financial mismanagement, the organisation believes withholding funding intended for basic services is a blunt instrument that is likely to deepen hardship in municipalities where residents are already living with unreliable water supply, failing sanitation infrastructure and deteriorating municipal services.

"Communities did not create this crisis. Municipal leaders did," said WaterCAN Executive Director Dr Ferrial Adam.

"There is a fundamental contradiction in trying to protect public finances by undermining the very services those finances are meant to support. Officials who broke the law should face the consequences, not the residents who have already endured years of municipal failure."

According to National Treasury, the affected municipalities have persistently failed to comply with the Municipal Finance Management Act (MFMA), failed to deal appropriately with unauthorised, irregular, fruitless and wasteful expenditure, accumulated significant debt to Eskom, water boards and other creditors, and failed to implement effective consequence management.

"These are not administrative oversights or technical delays. Treasury's own findings describe years of financial mismanagement, weak governance and a failure to hold officials accountable. That is precisely where corrective action should be directed."

WaterCAN said it was particularly concerned by Treasury's assertion that the temporary withholding of the equitable share would have no impact on service delivery.

"The equitable share exists to enable municipalities to provide basic services, particularly to poor households. It is therefore difficult to accept the claim that withholding these funds will have no impact on service delivery."

"Municipalities already struggling to maintain water and sanitation infrastructure cannot simply absorb the loss of a significant revenue transfer without consequences. Whether the impact is delayed maintenance, unpaid contractors, deferred infrastructure repairs or worsening service delivery, communities inevitably carry the cost."

Treasury has indicated that transfers will resume once municipalities meet a number of compliance conditions. However, WaterCAN notes that many of these conditions require municipalities to demonstrate improved financial performance over the coming months, meaning some may only be able to comply from September or October.

"This is unlikely to be the short-term administrative correction that Treasury suggests. The longer municipalities remain without these transfers, the greater the risk that essential services will deteriorate further."

WaterCAN also questioned why stronger intervention has only come now when many of these financial failures have persisted for years.

"If municipalities have repeatedly failed to comply with the MFMA, accumulated unauthorised expenditure and allowed debt to escalate over several financial years, why has decisive intervention only happened now? Communities have been living with collapsing infrastructure and unreliable services for years."

WaterCAN stressed that the MFMA already provides mechanisms to hold individuals directly accountable.

"If Treasury's concern is dereliction of duty, then the response should focus on those responsible. Section 32 provides for the recovery of unauthorised, irregular, fruitless and wasteful expenditure from responsible individuals. Section 171 provides for disciplinary proceedings for financial misconduct, while Section 173 creates criminal liability where officials deliberately or through gross negligence fail in their financial responsibilities."

Adam said National Treasury should deploy administrators to each municipality to assist them in meeting their fiscal obligations.

"South Africans deserve to know how many municipal managers, chief financial officers and political office bearers have faced disciplinary action, how many cases have been referred to law enforcement agencies, and how much public money has actually been recovered from those responsible."

WaterCAN called on National Treasury to publicly disclose the consequence management measures being pursued against responsible officials and office-bearers, including disciplinary proceedings, civil recovery processes and criminal referrals where appropriate. It also called on municipalities to publish clear recovery plans, including timelines for restoring financial compliance while ensuring that essential water and sanitation services are protected.

"We fully support accountability. But accountability must be directed at those who made the decisions, ignored repeated warnings and failed to uphold their legal responsibilities."