Andisiwe Makinana|Published
National Treasury is proposing new laws that could see municipal officials, political office-bearers and board directors held personally liable for unauthorised, irregular, fruitless and wasteful expenditure.
The draft fiscal anchor legislation, released for public comment as Finance Minister Enoch Godongwana delivered the medium-term budget policy statement (MTBPS) on Wednesday, is expected to be tabled in Parliament next year.
The proposals form part of wider reforms to strengthen financial accountability, improve municipal revenue collection and address persistent financial problems affecting local government.
Proposed law aims to strengthen financial accountability
Godongwana said the proposed legislation would establish fiscal sustainability as a standard in the Public Finance Management Act (PFMA), rather than imposing 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 said the changes would broaden National Treasury’s powers over municipal financial systems and controls, including its 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,” the document states.
The Financial and Fiscal Commission will also be given new responsibility for independently reporting on whether the fiscal framework is consistent with the administration’s fiscal plan.
Godongwana said the approach would preserve flexibility in changing economic conditions while strengthening transparency, accountability and fiscal discipline.
Municipal Finance Management Act to be modernised
Godongwana announced a comprehensive modernisation of the Municipal Finance Management Act (MFMA), 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,” Godongwana said.
The proposed changes would allow for stronger early interventions under section 139 of the Constitution, improve National Treasury oversight and establish mechanisms for personal liability for officials, political office-bearers and board directors responsible for unauthorised, irregular, fruitless and wasteful expenditure.
The reforms also aim to discourage councils from adopting unfunded budgets and improve the credibility of municipal budget estimates.
Godongwana said the PFMA updates drew 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.
Treasury targets financially distressed municipalities
Godongwana said the focus on local government reflected the impact of service-delivery failures on economic growth and job creation.
The government is strengthening interventions to support financially distressed municipalities, including withholding or reallocating funds where grant conditions are not met and linking allocations more closely to service delivery.
“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,” the MTBPS statement reads.
In mid-2026, National Treasury withheld equitable share transfers from 69 municipalities that had failed to meet these obligations.
By July 31, 38 of the municipalities had concluded repayment plans, and R4.2 billion had been paid towards outstanding creditor debt, according to National Treasury.
However, Eskom told Parliament’s standing committee on appropriations earlier this month that municipal debt owed to the power utility had risen to R122 billion, more than double the R59 billion owed in 2023.
Eskom said the increase had occurred despite government interventions, including a repayment plan arranged through National Treasury.
Reforms aim to improve basic service delivery
Godongwana also outlined measures intended to improve the financial management of municipal services.
The Metro Trading Services Reform Programme 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. Seven of the eight metropolitan municipalities are participating.
The Smart Meters Grant Programme is intended to improve billing accuracy, reduce losses and strengthen municipal revenue collection, ensuring that money collected for services is reinvested in infrastructure.
The programme has installed 247,206 meters in 28 municipalities and created an estimated 3,734 local installation jobs to date.