The government is planning to introduce new laws that will see politicians and municipal officials held personally liable for wasting public funds.
As Finance Minister Enoch Godongwana delivered the Medium-Term Budget Policy Statement (MTBPS) yesterday, the National Treasury released draft fiscal anchor legislation for public comment. The legislation is expected to be tabled in Parliament next year.
Godongwana said the proposed legislation sets out fiscal sustainability as a standard in the Public Finance Management Act (PFMA), instead of a rigid numerical rule.
“It requires each administration to commit to its own fiscal objectives, consistent with the electoral mandate. It then reports against it at every Budget and explains any material deviation to Parliament,” he said.
MTBPS documents published yesterday revealed that the proposed wide-ranging changes will also broaden the National Treasury's powers over municipal financial systems and controls, including involvement in the appointment of chief financial officers.
“Writing such a standard into law will create a durable commitment to sound public financial management, preventing a return to the fiscal deterioration that characterised the period from the global financial crisis to the early 2020s,” states the document.
Godongwana also announced a comprehensive modernisation of the Municipal Finance Management Act, the first in 23 years.
“The changes focus on funded budgets, improved revenue management, clearer accountability and earlier intervention when municipalities experience financial distress.”
He said the Bill will require municipalities to demonstrate that their budgets are genuinely funded.
“It reinforces revenue collection while protecting basic services for poor households and enhances National Treasury oversight and professional financial management.
“It also introduces stronger mechanisms to investigate financial misconduct and recover losses, together with a clearer framework for financial recovery and intervention in distressed municipalities,” he said.
Godongwana said updates to modernise the PFMA draw on more than two decades of experience, including lessons from the State Capture Commission.
“They clarify the duties of accounting officers and boards, strengthen action on financial misconduct, reinforce governance and accountability in public entities, and improve support for distressed entities,” he said.
The Financial and Fiscal Commission will be given new responsibility to independently report on the consistency of the fiscal framework with the administration’s fiscal plan.
“This approach preserves flexibility in changing economic conditions while strengthening transparency, accountability, and fiscal discipline. Most importantly, it helps to ensure that developmental priorities and constitutional obligations are pursued at a pace that public finances can sustain.
“That is how we protect our economic future and our constitutional commitments,” said Godongwana.
According to the Treasury documents, the proposed changes in the MFMA will allow for robust early interventions under Section 139 of the Constitution, strengthen oversight of financial management by the National Treasury, and provide for officials, political office bearers, and board directors to be made personally liable for unauthorised, irregular, fruitless and wasteful expenditure, he said.
“They deter councils from adopting unfunded budgets and establish provisions for more credible budget estimates. They also broaden National Treasury powers over financial systems and controls, including in the appointment of chief financial officers. These measures are part of a suite of reforms to strengthen the integrity of public finance management across all spheres of government.”
Godongwana explained that the particular focus on local government was because its service-delivery failures continue to limit economic growth and job creation, and the comprehensive implementation of structural reforms will benefit the growth outlook, but this required coordinated action.
Documents show that the government was also strengthening active interventions to support sustainable turnarounds in financially distressed municipalities, and the MFMA reforms are part of these efforts.
“To improve financial management and governance in local government and protect basic services, government is intervening directly where municipalities persistently fail to pay for electricity, water, pensions and taxes,” reads the MTBPS statement.
In mid-2026, the National Treasury withheld equitable share transfers from 69 such municipalities.
The National Treasury said by July 31, 38 of them had concluded repayment plans and R4.2 billion had been paid towards outstanding creditor debt.
Eskom, however, told Parliament’s Standing Committee on Appropriations earlier this month that the municipal debt to the company had shot up to R122bn, more than double from the R59bn it was owed in 2023. The power utility said this was despite the government’s interventions, including a repayment plan arranged through the National Treasury.
Godongwana also announced that over the medium term (next three years), grant conditions will be enforced, funds withheld, or reallocated where municipalities do not comply, and allocations will be tied more closely to delivery.
Additional reforms to strengthen delivery of basic services include the Metro Trading Services Reform Programme, which aims to ensure that revenue collected for water, electricity and waste removal is reinvested in infrastructure. The 2026 budget allocated R27.7 billion to the programme, including R8.6 billion in incentives.
He said seven of the eight metropolitan municipalities are taking part in the programme.
There is also a Smart Meters Grant Programme which helps participating municipalities to improve billing accuracy and reduce losses. It aims to turn around municipal revenue collection and ensure that money collected for services is reinvested in infrastructure.
To date, the programme has installed 247 206 meters in 28 municipalities and created an estimated 3 734 local installation jobs.