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Karoo municipalities still under scrutiny despite Treasury releasing funds

The release of the July money lowers the immediate risk of disruption for Karoo residents. The larger question is still unanswered: whether the affected councils can correct the problems before the next funding decision arrives in December.

Photo: Jacob Ode.

Several municipalities serving towns across the Karoo and southern Free State are among 69 councils whose July funding was temporarily withheld by National Treasury over serious financial-management concerns.

The affected municipalities include Beaufort West, Laingsburg, Inxuba Yethemba, Emthanjeni, Ubuntu and Umsobomvu. Together, they provide services to towns including Cradock, Middelburg, De Aar, Hanover, Britstown, Victoria West, Richmond, Loxton, Colesberg and Noupoort.

Renosterberg, Thembelihle and Siyathemba in the Northern Cape were also included. Their municipal areas cover several smaller Karoo communities, including Philipstown, Petrusville, Strydenburg, Prieska and Marydale.

In the southern Free State’s False Karoo, the affected councils include Letsemeng, Kopanong and Mohokare, along with the Xhariep District Municipality. These municipalities serve towns such as Philippolis, Trompsburg, Fauresmith, Edenburg, Smithfield, Rouxville, Koffiefontein and Jacobsdal.

The immediate funding threat is now easing. Finance Minister Enoch Godongwana announced on July 28 that the outstanding allocations would be released from Friday, July 31. However, he warned that the decision did not mean the affected councils had met the required financial standards.

Why the money was withheld

The Local Government Equitable Share is money transferred by national government to municipalities. This money is intended for councils to provide basic services to poorer households that cannot afford the full cost of water, sanitation, refuse removal and other municipal services.

National Treasury temporarily withheld the July transfers under section 216(2) of the Constitution, read together with the Municipal Finance Management Act. The intervention followed persistent failures to comply with financial laws despite earlier guidance and training, according to Treasury. The concerns included failures to deal properly with unauthorised, irregular, fruitless and wasteful expenditure. Treasury also identified weaknesses in financial misconduct investigations and disciplinary procedures.

In some municipalities, oversight bodies had not processed cases as required. Others failed to show that losses were being investigated and that money was being recovered where possible. Treasury described the measure as corrective rather than punitive. The purpose was to press councils to improve their financial management and protect public money.

Release does not amount to clearance

Godongwana said that 20 of the 69 municipalities had received their full equitable-share allocations during the assessment process. A further 21 had received partial payments while 28 had not received any part of the July transfer by the time of his announcement. Treasury has not published a breakdown showing which Karoo councils fall into each group.

The remaining funds are being released to prevent the intervention from harming basic services. Equitable-share money is especially important in rural municipalities, where poverty is widespread and municipal revenue bases are small,

Godongwana made it clear that the release was conditional. Treasury’s assessment found continuing weaknesses in municipal budgeting, cash-flow management, oversight and accountability.

The short-term relief therefore does not close the matter. Municipalities must submit reports and supporting evidence showing how they are dealing with irregular expenditure and disciplinary cases.

The first formal reporting deadline is 30 September 2026. Further progress will be expected during October and November, with Treasury considering another withholding process when the December equitable-share instalment becomes due.

Karoo towns face their own risks

Financial trouble in a metropolitan council can affect millions of residents, but difficulties in a small rural municipality bring their own pressures. Karoo councils must maintain services across large geographical areas while working with limited income and small technical teams.

Beaufort West and Laingsburg are the two Central Karoo municipalities named in Treasury’s statement. Prince Albert, the district’s third local municipality, was not included.

Inxuba Yethemba covers Cradock and Middelburg in the Eastern Cape, while Emthanjeni includes De Aar, Hanover and Britstown. Stats SA’s municipal classifications confirm these town groupings.

The inclusion of multiple councils across the Northern Cape Karoo and the False Karoo shows that the issue is not confined to one province or political administration. Rather, it points to a wider struggle to make rural municipal budgets credible while collecting enough revenue to keep services running.

Treasury’s national findings give some indication of the scale of the problem. Since the 2021/22 financial year, municipalities and municipal entities across South Africa have incurred R145.21 billion in irregular expenditure. Of that amount, R40.14 billion was recorded during 2024/25 alone.

Nationally, 116 municipalities adopted unfunded budgets in 2024/25. Municipalities also owed R3.40 billion in interest to Eskom and R1.21 billion in interest to water boards by the end of that financial year.

Those figures do not apply specifically to the affected Karoo councils, but they explain why Treasury is increasing pressure on municipalities to demonstrate stronger municipal financial management.