MTBPS 2026: what Treasury's municipal finance reforms mean

Badly run municipalities could have their funding withheld again. In his medium-term budget policy statement (MTBPS) on Wednesday, 21 October 2026, Finance Minister Enoch Godongwana said the National Treasury will change municipal finance laws, take over the appointment of municipal chief financial officers, and enforce grant conditions more strictly (EWN; TimesLIVE).

What did Treasury announce for municipalities?

• Changes to municipal finance law. Treasury plans to modernise the Municipal Finance Management Act (MFMA) and the Public Finance Management Act to deal with weak financial management and financial misconduct (EWN).
• Control of CFO appointments. The overhaul includes Treasury taking over the appointment of municipal chief financial officers (EWN).
• Personal liability. Under the proposed changes, political office bearers and board directors would be held personally liable for unauthorised and wasteful expenditure (EWN).
• Earlier intervention. The MFMA changes would compel earlier and more decisive provincial and national action when municipalities cannot restore financial stability on their own (TimesLIVE).
• Stricter grants. Godongwana said grant conditions will be enforced, funds withheld or reallocated where municipalities do not comply, and allocations tied more closely to delivery (TimesLIVE).

Can municipalities lose their funding again?

Yes. Godongwana said the intervention "may be repeated for municipalities that breach their commitment" (TimesLIVE).

In June, he suspended the July equitable share transfers to 69 municipalities over continued mismanagement of public funds, using section 216(2) of the Constitution read with section 38 of the MFMA (TimesLIVE). He said the failures included not paying bulk utility providers, SARS, the auditor-general and pension fund contributions (TimesLIVE).

Did the June funding cut work?

Treasury says it changed behaviour. According to Godongwana, 38 municipalities concluded formal, council-approved repayment plans, and payments to creditors reached R4.2 billion by 31 July (TimesLIVE).

What about money owed to municipalities?

Treasury will also act against national and provincial departments and public entities that owe municipalities at least R27.6 billion (TimesLIVE).

What changes for municipal electricity?

Municipalities that cannot run their own electricity distribution networks would be required to contract Eskom for operations, maintenance and billing. Godongwana said these agreements ring-fence collections to pay bulk power bills and fund network maintenance, with any surplus returned to the municipality (TimesLIVE).

When will this happen?

The law changes are proposals and still need to go through Parliament. Godongwana said a drop in unauthorised, irregular, fruitless and wasteful expenditure should be visible in the current financial year (TimesLIVE). The announcement comes two weeks before the local government elections on 4 November 2026 (TimesLIVE).