UPDATED with eMadlangeni Municipality’s comment at 10:47 on 8 July 2026.
Several KwaZulu-Natal municipalities, including Newcastle Municipality, eMadlangeni Municipality, Amajuba District Municipality and AbaQulusi Municipality, are among those facing the temporary withholding of their July 2026 equitable share transfers by National Treasury.
The move follows what Treasury describes as persistent failures in financial governance, particularly around Unauthorised, Irregular, Fruitless and Wasteful Expenditure (UIFWE), funded budgets, consequence management and compliance with the Municipal Finance Management Act (MFMA).
Premium Advertising Options Starting at R8 000. Email: [email protected]
While the decision forms part of a national intervention, its local impact is significant for northern KwaZulu-Natal, with multiple municipalities in the Amajuba, uMzinyathi and Zululand regions directly named.
According to National Treasury, the following KZN municipalities are affected:
Newcastle Local Municipality
eMadlangeni Local Municipality
Amajuba District Municipality
Umzinyathi District Municipality
iMpendle Local Municipality
AbaQulusi Local Municipality
uMkhanyakude District Municipality
For Newcastle, eMadlangeni, Amajuba District, Umzinyathi, iMpendle, AbaQulusi and uMkhanyakude, Treasury listed the same underlying concern: failure to address UIFWE and implement consequence management.
“The decision follows persistent and serious non-compliance with the Municipal Finance Management Act (MFMA) and its supporting regulations, despite support provided by the National Treasury through guidance, engagement, and formal or informal communication,” stressed the National Treasury.
Moreover, Treasury said the municipalities had been given written notice before the withholding of funds and were provided with an opportunity to submit reasons why the transfers should not be withheld.
“The municipalities have been given sufficient notice in writing and urged to take measures to change their financial management positions ahead of the withholding of funds. They were also given a platform to send, in writing, reasons why their funds should not be withheld,” said Treasury.
The department clarified that the temporary withholding is being implemented in terms of section 216(2) of the Constitution, read with section 38 of the Municipal Finance Management Act 56 of 2003.
Treasury further stated that the measure is corrective rather than punitive and, due to its short-term nature, immediate service delivery disruptions are not anticipated.
However, the decision places renewed pressure on affected councils to prove that they are dealing with financial mismanagement, outstanding UIFWE matters, weak oversight and consequence management.
Treasury also pointed to broader municipal failures across the country, including unfunded budgets, late payments to Eskom and water boards, and weak Municipal Public Accounts Committee processes.
“Consistently incurring UIFWE is also indicative of weak governance within municipalities, and instances where it is accompanied by financial losses negatively impact service delivery. In addition, non-payment of service providers results in fruitless and wasteful expenditure due to interest and penalties charged and service delivery disruptions,” said the National Treasury, adding that some affected municipalities had failed to process UIFWE as required by section 32 of the MFMA.
Section 32 of the MFMA requires municipal councils to recover unauthorised, irregular, fruitless and wasteful expenditure from those found liable, unless the expenditure is investigated, deemed irrecoverable and formally written off.
Treasury further stated that some municipalities had failed to properly process UIFWE cases through their MPACs, raising concerns over the effectiveness of municipal oversight structures.
For Newcastle, the latest development follows Newcastillian News’ previous reporting on the Auditor-General’s findings for the municipality.
As reported on 25 June 2026, Newcastle recorded:
Unauthorised expenditure: R467.8 million
Irregular expenditure: R81.6 million
Fruitless and wasteful expenditure: R71.6 million
The Auditor-General’s report also identified shortcomings in Newcastle’s infrastructure maintenance, particularly around water losses affecting the main town and surrounding areas such as Madadeni and Osizweni.
The report pointed to a high volume of leaks, inadequate maintenance practices and operational inefficiencies in water infrastructure.
According to the Auditor-General, Newcastle lacked standard operating procedures and a structured maintenance plan for water loss management. As a result, water losses increased to R74.65 million, up from R61.93 million in the 2023/24 financial year.
Furthermore, Treasury said transfers would only resume once the affected municipalities meet the required conditions and submit proper proof that these conditions have been met.
“Transfers will resume once the affected municipalities meet the required conditions and submit proper proof of the conditions being met. National Treasury will keep working with municipalities, provincial treasuries, and cooperative governance structures to strengthen sound financial management.”
While the Newcastle Local Municipality, AbaQulusi Local Municipality, and the Amajuba District Municipality remained tight-lipped around the temporary withholding of the funds, the eMadlangeni Local Municipality explained that the temporary withholding of its equitable share was unexpected.
This, it said, was because the Municipality had formally informed National Treasury, in letters dated 22 May and 26 June 2026, that engagements were underway between the Municipality and Eskom.
“The matters raised in both letters have not yet been responded to,” stated the eMadlangeni Local Municipality.
Compounding this, the eMadlangeni Local Municipality explained that National Treasury’s decision to temporarily freeze the July 2026 funding appeared to follow a blanket approach to affected municipalities.
However, the Municipality stressed that not all the reasons cited by National Treasury for withholding the equitable share were applicable to eMadlangeni.
“The only reason that applies to eMadlangeni Municipality is the Eskom debt. To this end, the Municipality has been in engagement with Eskom since the beginning of 2026. The details of these engagements were reported to National Treasury in our June 2026 letter, and as such, we did not expect the Eskom matter to result in the temporary withholding of the equitable share,” stated the Utrecht-based Municipality, adding that it was currently engaging with all relevant stakeholders to ensure that this matter is resolved as swiftly as possible.
Against this backdrop, the eMadlangeni Municipality stressed that the temporary withholding of the equitable share has been occasioned solely by the Eskom debt and not by any other financial irregularities or governance issues.
This the Municipality stressed, was also confirmed by National Treasury in their letter dated the 6th July 2026.
In addition to its ongoing engagement with Eskom regarding the Distribution Agency Agreement, the eMadlangeni Local Municipality explained that it submitted a comprehensive repayment plan to Eskom on Tuesday, 7 July 2026, in line with National Treasury’s requirements.
“Once Eskom has accepted the repayment plan, it will be submitted to National Treasury to facilitate the release of the equitable share,” noted the eMadlangeni Local Municipality.
Despite its equitable share now hanging in limbo, the eMadlangeni Local Municipality reassured the Utrecht Community that it was doing everything within its power to address electricity distribution losses, which incudes stronger enforcement measures against electricity theft.
“We are also engaging with relevant national departments to review our funding model, given our limited revenue base, which is further exacerbated by our unique spatial and geographical circumstances. The Municipality consists of a small town surrounded predominantly by rural homesteads, which significantly constrains its revenue-generating capacity,” concluded the eMalandgeni Local Municipality.
MEC for KZN CoGTA, Reverend Thulasizwe Buthelezi, said the department respected Treasury’s constitutional mandate under section 216(2) of the Constitution and section 38 of the MFMA to enforce fiscal discipline and ensure the proper management of public money.
The department further said it aligned itself with the principle that weak governance, UIFWE and a lack of consequence management could not be tolerated if local government was to be professionalised.
MEC Buthelezi described the withholding of funds as an urgent wake-up call for the political and administrative leadership of the affected KZN municipalities.
“Our focus is to ensure that local governance in KwaZulu-Natal is ethical, sustainable, and financially sound. While the withholding of funds is a serious measure, KZN COGTA is already actively addressing governance issues across these regions. For example, a formal constitutional intervention was recently implemented in the iMpendle Local Municipality to address persistent challenges. We will widen and intensify our institutional support across all affected councils to ensure they fully comply with Treasury regulations,” declared MEC Buthelezi.
KZN CoGTA also moved to reassure residents that, because the withholding is designed as a short-term corrective action, immediate service delivery disruptions are not anticipated.
However, the department said it would closely monitor municipal operations on the ground to safeguard essential basic services.
“To ensure the rapid release of the withheld funds, KZN COGTA in close collaboration with the KZN Provincial Treasury is immediately dispatching specialised municipal finance and governance experts to the affected municipalities,” stated KZN CoGTA.
These teams are expected to assist affected municipalities in addressing the compliance failures identified by Treasury, particularly around:
The adoption of realistically funded budgets
The functional operationalisation of MPACs to process outstanding UIFWE cases
The implementation of consequence management protocols in accordance with Chapter 15 of the MFMA
“KZN COGTA remains committed to fostering strong intergovernmental relations and building highly capable, responsive local government structures that serve the best interests of the people of KwaZulu-Natal,” concluded MEC Buthelezi.
View the National Treasury’s full statement on implementing measures to ensure proper management of public money by municipalities below:
To read the criteria and procedures for selected municipalities to secure the release of the withheld July 2026 LGES in terms of section 216(2) of the Constitution, see below:
Taken together, Treasury’s decision and KZN CoGTA’s response mark a clear escalation in oversight for several municipalities in the province.
For Newcastle, eMadlangeni, Amajuba District and AbaQulusi, the issue is no longer only about audit findings or repeated warnings.
The withholding of funds now places direct pressure on municipal leadership to show measurable correction, particularly in dealing with UIFWE, consequence management, funded budgets and oversight systems.
Advertising: Get professionally created business tools from Pixelfish Marketing, for FREE. Simply tap the advert
Although immediate service delivery disruptions are not expected, the longer-term outcome will depend on whether the affected municipalities can move beyond compliance promises and show that corrective action is being implemented.
What are your thoughts on all of this? Be sure to let us know below.
Newcastillian News invites your input. We ask that you keep your remarks courteous and on-topic. We do not allow any form of hate speech, such as racist or sexist comments. All comments are subject to moderation in line with our User Rules and Commenting Policy.
