Treasury warns municipalities about revenue collection as debt jumps by R60bn

The snowballing municipal debt across South Africa is almost five times as high as it was seven years ago, with little sign of slowing down. National Treasury earlier this week released its local government report for the second quarter of the 2025-26 financial year. The report is considered an “early-warning mechanism” of financial performance, detailing progress in expenditure as well as debt owed to and by municipalities.

Treasury’s report stated that municipalities had adopted budgets totalling R689.1 billion and had spent R312 billion of that so far in operating and capital expenses. Treasury grants R176.8 billion towards municipal budgets via the Division of Revenue Act and other conditional grants, with much of the remainder coming from revenue collection. Of the 257 municipalities in the country, 50 reported negative cash flow balances for the second quarter of the year.

Treasury warned of under-collection of revenue. Municipalities targeted a collection rate of 78% at the adoption of the budgets, but were lagging behind at 69%. “Municipalities’ financial sustainability depends on their ability to collect outstanding debt from consumers.

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“Municipalities must rigorously implement credit-control and debt-collection policies to collect outstanding debt regardless of the period for which it has been outstanding,” stated Treasury. The report shows that 28% of all combined municipal operating budgets were allocated to salaries and wages. In the2018-19 financial year, national municipal debt totalled R72.4 billion and has increased dramatically since. Combined totalled municipal consumer debt sat at R467.2 billion as of 31 December 2025, up from R405.1 billion at the same time the previous year.

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