Municipal debt hits R484.5bn as Treasury withholds funds from 69 councils
Consumer debt owed to municipalities climbed from R427.7 billion in June 2025 to R484.5 billion by June 2026, with collection rates stuck at 63.9 percent, according to the Medium Term Budget Policy Statement.
South Africans owe their municipalities R484.5 billion, up from R427.7 billion a year earlier, and the councils are collecting only 63.9 percent of what they bill. The figures come from the 2026 Medium Term Budget Policy Statement tabled by Finance Minister Enoch Godongwana on Wednesday, as reported by Sunday World on 21 October.
On the other side of the ledger, municipal creditors are owed R185.2 billion, up from R156.1 billion a year earlier. More than half of that outstanding liability sits in bulk electricity accounts, which is the money councils owe Eskom and the electricity supply chain that keeps the lights on.
The collection rate is the number that matters most to households. A council that bills R100 and receives R63.90 has to fund the same clinics, refuse trucks, water pumps and street lights from a shrinking pot. Godongwana warned that weak municipal collections carry through the whole public sector, hitting the financial sustainability of Eskom and the water boards, and the MTBPS names persistent non-payment as one of the biggest risks to local government finances and service delivery.
Treasury has already acted. In June the government withheld equitable share transfers from 69 municipalities over unpaid bulk services, pension contributions, South African Revenue Service obligations and money owed to the Auditor-General. By July, 38 municipalities had entered repayment arrangements and R4.2 billion had been paid to creditors.
The recovery plan leans heavily on metering. According to National Treasury, the Smart Meters Grant Programme has installed more than 247,200 smart meters across 28 municipalities, generating an estimated R361 million in additional municipal revenue and supporting about 3,700 installation-related jobs. Treasury argues that prepaid and smart systems cut electricity losses, curb theft and make consumers pay before they consume, while giving councils more accurate consumption data and tighter control over revenue.
Money from national government will increasingly depend on performance. The MTBPS says future infrastructure and conditional grant allocations will be tied to measurable improvements in collection rates, maintenance standards and asset management, and that municipalities which fail to improve may see funding reduced, withheld or reallocated.
Godongwana also announced that Treasury is moving to amend the Municipal Finance Management Act, the law that governs how councils budget, spend and account for public money. The planned changes are intended to address chronic weaknesses in financial administration, allow earlier intervention in troubled municipalities and sharpen accountability for officials and councillors responsible for financial mismanagement.
The MTBPS picture is of a national fiscus stabilising while local government remains the weak point in the public sector. For a resident, that translates into the service they already see: a bill that arrives, a payment that is disputed or missed, and a council with less room to fix the pipe or replace the transformer.
