KwaZulu-Natal municipalities have recorded mixed financial performance in the third quarter of the 2025/26 financial year, with signs of stability in revenue collection overshadowed by persistent structural challenges.
Tabling the Consolidated Municipal Budget Performance Report on Thursday, 7 May 2026, MEC for Finance Francois Rodgers said municipalities generated R85.9 billion in operating revenue by the end of March 2026, representing 78.7% of adjusted budgets, surpassing the 75% benchmark expected at the end of the third quarter.
However, Rodgers warned that the overall figure conceals significant disparities between municipalities.
“Revenue performance is heavily concentrated in major urban and non-delegated municipalities. Metro and large local municipalities contribute the overwhelming share of revenue, while many smaller municipalities remain structurally dependent on transfers.
“This imbalance is not sustainable in the long term and must be addressed through revenue reform, improved billing systems, and credible indigent management,” Rodgers said.
On operating expenditure, municipalities incurred a total of R73.7 billion (68.9%) of their adjusted budgets.
While this appears below the 75% benchmark, Rodgers warned that underspending often reflects deeper financial management issues rather than efficiency.
“In too many cases, lower expenditure reflects delayed payments to creditors, incomplete reporting, system weaknesses, or failure to account correctly for depreciation, debt impairment, and bulk purchases.
“We must therefore treat underspending with caution. Fiscal restraint is commendable; financial distortion is not,” the MEC said.
Capital spending, a key driver of service delivery, including pipes, roads, sanitation, electrification, and community assets, remain a major concern.
Municipalities reported capital revenue of R7.2 billion (46.6%) of adjusted budgets. Capital expenditure stood at R7.4 billion (47.6%), rising to 49.5% when reporting errors are corrected.
The MEC said the level of performance is well below the desired trajectory for the third quarter and points to ongoing weaknesses in infrastructure delivery.
“Of concern is the persistent under-performance in infrastructure delivery, compounded by incorrect reporting in certain municipalities, delays in project implementation, weak contractor management, and cash-flow constraints.
“Infrastructure backlogs cannot be resolved on PowerPoint presentations alone. They require execution, discipline and consequence management,” the MEC said.
The report also highlighted growing financial pressure from unpaid municipal bills. Total outstanding debtors rose to R74.3 billion, with more than 86% of the debt, R64.1 billion older than 90 days.
Households account for the majority of total outstanding debt, followed by commercial users and organs of state.
Rodgers stressed that compassion does not mean chaos, warning that indigent support does not justify billing failure and social protection cannot survive in a municipality that collapses financially.
“Municipalities must maintain credible indigent registers, enforce credit control fairly but firmly, improve billing accuracy, and take political responsibility for revenue decisions,” Rodgers said.
At the same time, municipalities reduced creditor debt to R9.2 billion, although most of this remains unpaid beyond the legally required 30-day period. Bulk electricity and water accounts continue to dominate unpaid obligations.
Rodgers warned that failure to settle these accounts poses serious risks to service delivery.
“Unpaid Eskom and water board accounts are not accounting issues — they are systemic service delivery risks,” he said.
Spending of conditional grants also lagged behind expectations, with municipalities utilising only 62.5% of allocated funds by the end of the quarter.
Twenty municipalities face serious financial challenges
A total of 20 municipalities in the province have been flagged as facing serious financial challenges. Of these, six are already receiving support under Section 154 of the Constitution.
The MEC said additional technical support has been deployed through the Municipal Finance Improvement Programme, extended to March 2027.
Despite ongoing interventions, Rodgers stressed that long-term improvement depends on stronger governance and accountability at municipal level.
“Let me state clearly, support does not replace accountability. No intervention can succeed where political leadership interferes with administration, budgets are knowingly unfunded, supply chain controls are undermined, or consequence management is absent,” he said. – SAnews.gov.za
