Government has announced strengthened measures to improve the operations and financial management of local and provincial government, marking a shift to structural intervention from oversight.
“At the municipal level, this shift involves changes to legislation, governance arrangements, and technological intervention. In provinces, the government is enforcing strict headcount controls and compensation discipline,” according to the 2026 Budget Review by National Treasury.
Local government is the sphere where communities experience the state most directly, but many municipalities are in financial and operational distress and therefore unable to deliver services as they should.
“Audit outcomes highlight this unacceptable reality: 63% of municipalities are in financial distress, and the proportion of clean audits remains unacceptably low. A central challenge with municipalities is that they not only differ in capacity but also in their revenue-raising potential.
“This demands a more targeted approach to respond to the diverse pressures facing municipalities. The National Treasury is revitalising support for development of long-term financial plans,” Minister of Finance Enoch Godongwana said on Wednesday, in Parliament.
These plans will improve project identification, sustainably plan cash flows, and inform financial decisions.
“This will negate the challenge of unfunded mandates and limited capacity to maintain infrastructure and sustain services. Further structural reforms are underway, including a comprehensive review of the local government fiscal framework.
“Together, these reforms will modernise the intergovernmental system and build a more capable, resilient and appropriately differentiated local government sphere,” the Minister said.
Godongwana made these remarks when he tabled the 2026 Budget, which outlined all the financial, economic, and social commitments that the government will prioritise in its planned expenditure.
The Municipal Finance Management Act (MFMA) Amendment Bill, scheduled for public comment in early 2026, forms the legal backbone of the reform package.
It will support the local government fiscal framework by enforcing funded budgets, strengthening expenditure controls and consequence management, and clarifying the treatment of irregular expenditure to focus on financial losses.
The bill will strengthen monitoring and intervention tools for the national and provincial treasuries, including more effective financial recovery measures and clearer safeguards during interventions.
In terms of governance, the state is strengthening its intervention framework for municipalities in severe financial distress.
Municipal Infrastructure Grant reform
Government is also reforming the municipal infrastructure grant to address persistent underspending, misuse of funds, and capacity constraints that hinder effective service delivery in non-metropolitan municipalities.
“A split delivery model has been introduced. Municipalities with proven capacity will continue to receive funding directly. However, where there are serious capacity or governance failures, the delivery will shift to an indirect model.
"Capable district municipalities and other accredited implementing agencies will form part of their infrastructure delivery suite. The intention is to protect citizens from persistent municipal dysfunctions that have long undermined effective service delivery," Godongwana said.
Provincial government
Provinces have begun to eliminate duplication and focus resources on activities with the greatest impact for citizens.
In 2026, three provinces plan to conduct comprehensive spending reviews.
“To reduce compensation pressures, provinces are tightening staffing and compensation controls (including headcount verification), closely monitoring overtime and improving efficiency in support services such as security, catering and fleet. Several provinces have merged agencies in recent years to reduce overheads,” National Treasury said.
Government will implement efforts to reduce medico-legal claims.
“Provinces spend an average of R1.5 billion each year on settling these claims – funds that could otherwise support frontline health services.
“Efforts to reduce such claims include strengthening patient recordkeeping and safety systems, upgrading infrastructure, promoting mediation, conducting investigations and ensuring health staff work in their areas of expertise,” National Treasury said. -SAnews.gov.za
