Municipal crisis: Treasury freezes funding for 75 municipalities as Newcastle in KZN threatens court action
The Newcastle Municipality has threatened court action as it is among 75 municipalities affected by the withholding of the equitable share allocation by the national Treasury.
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Newcastle Municipality has given National Treasury an ultimatum to confirm the transfer of its equitable share allocation by today, December 15, warning that it will approach the High Court if no confirmation is received.
The municipality is one of 75 across the country affected by the withholding of funds according to the South African Local Government Association. The withholding of funds is due to non-compliance issues, an article in Business Report stated, including budget funding plans, irregularities identified by the Auditor-General of South Africa, outstanding pension fund submissions, South African Revenue Service compliance issues and water board arrears.
The municipality said a council resolution had been approved to take legal action should Treasury fail to provide written confirmation of the release of funds. Correspondence from the municipality to Treasury set the deadline of December 15 for confirmation of the transfer.
At the centre of the dispute, the municipality said, is the release of equitable share funds, which it described as a constitutional instrument designed to safeguard service delivery.
“Newcastle Municipality remains governed, stable, and fully capable of delivering services. Basic services will continue uninterrupted, and no degree of pressure or misinformation will derail our unwavering commitment to our communities,” Mayor Xolani Dube said.
Municipal manager Zamani Mcineka added, “Despite efforts to destabilise this institution, Newcastle Municipality has remained compliant, operational, and resilient. We will continue to defend the integrity of this Municipality while serving our communities without fear, favour, or compromise.”
The municipality stated that at all times it has asserted that it is governed by law, subject to oversight, and fully capable of accounting for its financial and administrative affairs within the framework of the Constitution and the Municipal Finance Management Act. It also said internal governance structures, including council oversight and the Municipal Public Accounts Committee (MPAC), remain operational.
Meanwhile the South African Local Government Association (SALGA) said it had formally written to the National Treasury regarding concerns about the process followed in withholding the Local Government Equitable Share (LGES) tranche for December 2025.
It said this action has had direct implications for 75 municipalities across the country.
“Since September 2025, National Treasury issued two circulars outlining its intention to invoke Section 216 (2) of the Constitution and Section 38 of the Municipal Finance Management Act 56 of 2003. These measures permitted the withdrawal of the LGES, which supports critical municipal functions.
“In response, SALGA made multiple attempts to engage with National Treasury to prevent the risk of withholding and to ensure that affected municipalities could comply with legislative requirements before the scheduled payment of the December tranche. Despite SALGA’s repeated efforts, National Treasury did not provide the necessary cooperation.”
It added that the communication between the Treasury and municipalities regarding non-compliance issues had been unclear regarding what information was required and deadlines for submission were not adequately communicated.