The National Treasury says it has temporarily withheld approximately R13.5 billion in equitable share funding from 69 municipalities, with the release of the money dependent on municipalities entering into repayment agreements with their creditors.
The creditors include Eskom, water boards and pension funds, all of which are owed significant amounts by several municipalities.
According to Treasury, the intervention is aimed at addressing the persistent culture of non-payment and strengthening financial discipline within local government.
Deputy Director-General Ogalaletseng Gaarekwe said municipalities will be required to conclude payment plans with their creditors before any of the withheld funds are released.
"What we are requesting from those municipalities is a payment plan signed by themselves and those creditors. Once they give us that, we'll release a portion of the money accordingly. One-third will go towards settling those accounts as agreed with the creditors," Gaarekwe said.
He explained that municipalities would also need to provide proof that payments had been made before additional funding is released.
"Once they provide proof, then we release the money. That means the money could be withheld for only two weeks, it depends on how quickly the municipality acts. In total, we've withheld R13.5 billion," he said.
Treasury has emphasised that the temporary withholding of equitable share allocations is intended as a corrective measure rather than a punitive one.
Gaarekwe also assured residents that the intervention is not expected to disrupt the delivery of basic municipal services, saying the process has been designed to encourage municipalities to improve their financial management while continuing to provide essential services.