Twenty municipalities in KwaZulu-Natal have been flagged for severe financial distress, said KZN Finance MEC Francois Rodgers on Thursday. 

Rodgers revealed this when he addressed Members of the Provincial Legislature (MPLs) during the tabling of the Municipal Finance Management Act (MFMA) 4th Quarter consolidated statement of the KZN municipal performance budgets.

Rodgers also explained that Finance Minister Enoch Godongwana has requested him to submit the names of municipalities that the minister should invoke by September 15, 2025.

Rodgers stated that he intends to comply with this request, explaining that the invocation of Section 216 (2) will be part of efforts to reduce unauthorised, irregular, fruitless, and wasteful expenditure (UIFWE) in local government institutions in the province.

“This will stop the flow of funds from the national and provincial Treasuries to the affected municipalities pending the resolution of expenditure challenges, which remain a concern as several municipalities either did not have preventative controls or utilised preventive controls that were ineffective,” he said.

Rodgers said that the analysis of the National Treasury’s Muni eMonitor platform shows that, for the quarter ending December 30, 2024, five of the top 10 delegated municipalities reported having detected over R59 million in UIFWE during the quarter ending December 30, 2024.

For the quarter ending March 31, 2025, six of the top 10 delegated municipalities had detected over R73 million.

Rodgers said that the KZN Treasury will continue to monitor and support municipalities to address challenges pertaining to UIFWE.

He explained that the criteria for identifying municipalities that qualify for the invocation of Section 216 against them, KZN Treasury considers whether there has been any incurrence of UIFWE during the 2024/25 financial year, whether the total balances have increased or remained stagnant, including whether any matter has been investigated and concluded in line with Chapter 15 of the MFMA read with the Municipal Regulations on Financial Misconduct Procedures and Criminal proceedings.

Rodgers added that KZN municipalities generated R99.3 billion in operating revenue — 98.6% of their adjusted budgets — though a shortfall of R1.4 billion remains.

“The eThekwini Metro is the largest revenue contributor, while some districts like uMkhanyakude, Harry Gwala, and uMzinyathi contributed less than 2%, reflecting both their smaller economic bases and the need for targeted support to boost revenue generation.” 

On the expenditure side, Rodgers said that municipalities spent R91.2 billion, or 90.2% of their adjusted budgets, resulting in under-expenditure of R9.9 billion.

“While under-expenditure can sometimes reflect savings, in our context, it often signals delays in service delivery, procurement challenges, or capacity constraints. Employee-related costs and bulk electricity purchases are the largest expenditure items, highlighting the need for ongoing efficiency and cost control,” he said. 

The total municipal debt at year-end stands at R67.1 billion, with 84% overdue for more than 90 days, predominantly from households. Rodgers said this poses a significant risk to municipal cash flow and service delivery.

Municipalities received R9.6 billion in grants but only utilised 73.8% of them. 

“Under-expenditure on grants is another area of concern as it delays much-needed infrastructure programmes. Municipalities have been flagged for severe financial distress. Challenges faced by these municipalities include operating deficits, overdue creditors, negative cash positions, and adverse audit opinions,” Rodgers explained. 

The provincial and national Treasury, in partnership with the Cooperative Governance and Traditional Affairs (CoGTA), has deployed technical advisors and implemented a combined municipal support plan to support these municipalities.

This includes audit support, financial management training, revenue enhancement, and debt relief initiatives.

Rodgers concluded: “Let me be clear: support can only succeed where there is commitment and leadership.”

zainul.dawood@inl.co.za

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