The South African Local Government Association (SALGA) has reiterated its call for a fundamental review of the Local Government Fiscal Framework and funding mechanisms to ensure municipalities have adequate revenue for their service delivery responsibilities.

Following the release of the 2025/26 Medium Term Revenue and Expenditure Framework (MTREF) by the National Treasury, it is clear that municipalities face operating deficits as expenditure is projected to outpace revenue. Key cost drivers include rising electricity and water tariffs, declining revenue collection, affordability challenges, and increasing employee-related costs.

These deficits will hinder municipalities’ ability to address infrastructure and maintenance backlogs. Over the past decade, bulk tariffs from Waterboards and Eskom have risen sharply, with Eskom tariffs increasing by 446% between 2007 and 2019.

A review by SALGA found that in 2020/21, municipal own revenue covered only 60% of recurrent expenditure, while the 9.9% allocation from the national fiscus was insufficient for local government mandates.

Employee costs now exceed inflation, adding further financial strain. To support struggling municipalities, SALGA has introduced a revised exemption process during wage negotiations using financial distress indicators from the National Treasury.

Municipal debt remains a critical issue. As of 31 March 2025, municipalities are owed R416 billion by various customers, including government entities. This debt undermines their ability to meet maintenance and other expenditure requirements, including servicing long-standing debts such as those municipalities owe to Eskom.

Meanwhile, SALGA has made substantive inputs to the review of the 1998 White Paper, aiming to strengthen local government.SALGA calls on all stakeholders, residents, businesses, government entities, and partners to:

• Prioritise the settling of outstanding municipal accounts.
• Collaborate on sustainable solutions for municipal funding and service delivery.
• Engage actively in current policy discussions and reforms to ensure the long-term financial health of local government.

By working together, we can help municipalities achieve financial sustainability and fulfil their service delivery mandates for the benefit of all communities