Key Takeaways
- • National Treasury says South African municipalities collectively owed about R2 billion in unpaid pension contributions as of 30 June, according to a parliamentary reply to the Standing Committee on Appropriations.
- • Treasury may withhold municipalities' equitable-share allocations under Section 216(2) of the Constitution where no payment agreement exists or an existing agreement is not honoured.
- • Municipalities in the Free State and North West account for 79.4% of the outstanding debt, per information placed before the Standing Committee on Finance.
- • The amounts owed represent employee salary deductions that were not remitted to pension funds, according to data the FSCA provided to National Treasury.
- • Treasury previously withheld about R13.5 billion in Local Government Equitable Share transfers from 69 municipalities for persistent MFMA non-compliance earlier in the year.
Summary
National Treasury is engaging with South African municipalities that collectively owe about R2 billion in unpaid pension fund contributions, and has warned that it could withhold equitable-share allocations to enforce compliance. In a parliamentary reply to the Standing Committee on Appropriations, Treasury said the outstanding amount stood at about R2 billion as of 30 June. It said it could invoke Section 216(2) of the Constitution to withhold transfers where no payment agreement exists or where an existing agreement is not being honoured. The action may include "withholding or delaying the transfer of the municipality's equitable share allocation until specific requirements are fulfilled," including submission of a credible and affordable payment agreement with the pension fund concerned.
According to information provided to Treasury by the Financial Sector Conduct Authority (FSCA), the arrears represent employee salary deductions that were never remitted to pension funds. Information placed before the Standing Committee on Finance last month showed that municipalities in the Free State and North West accounted for 79.4% of total outstanding debt. Treasury has already used this lever: earlier this year it withheld about R13.5 billion in Local Government Equitable Share transfers from 69 municipalities after identifying persistent and serious non-compliance with the Municipal Finance Management Act.
The warning arrives as municipalities prepare to install new political leadership following the local government elections. Appropriations committee member Andrew Bateman argued that personal accountability must follow, stating that "a repayment agreement addresses the debt, but does not excuse those responsible," and that Treasury should apply its withholding power more firmly and consistently. He also said Treasury should disclose how much pension debt has been recovered through such withholdings. Separately, DA member Marina van Zyl has called on affected municipal workers to submit documentary evidence and said the DA would pursue criminal charges where appropriate.
The issue has also intensified following the Constitutional Court's refusal to grant the South African Local Government Bargaining Council (SALGBC) leave to appeal a ruling that struck down a 2021 municipal retirement-fund collective agreement. Reportedly decided on 29 September 2026, the decision ends a four-year legal dispute that began in 2022. The practical consequences for municipal workers depend on the agreement's provisions and the resulting legal position, and it remains unclear whether the parties will negotiate a replacement agreement.
According to information provided to Treasury by the Financial Sector Conduct Authority (FSCA), the arrears represent employee salary deductions that were never remitted to pension funds. Information placed before the Standing Committee on Finance last month showed that municipalities in the Free State and North West accounted for 79.4% of total outstanding debt. Treasury has already used this lever: earlier this year it withheld about R13.5 billion in Local Government Equitable Share transfers from 69 municipalities after identifying persistent and serious non-compliance with the Municipal Finance Management Act.
The warning arrives as municipalities prepare to install new political leadership following the local government elections. Appropriations committee member Andrew Bateman argued that personal accountability must follow, stating that "a repayment agreement addresses the debt, but does not excuse those responsible," and that Treasury should apply its withholding power more firmly and consistently. He also said Treasury should disclose how much pension debt has been recovered through such withholdings. Separately, DA member Marina van Zyl has called on affected municipal workers to submit documentary evidence and said the DA would pursue criminal charges where appropriate.
The issue has also intensified following the Constitutional Court's refusal to grant the South African Local Government Bargaining Council (SALGBC) leave to appeal a ruling that struck down a 2021 municipal retirement-fund collective agreement. Reportedly decided on 29 September 2026, the decision ends a four-year legal dispute that began in 2022. The practical consequences for municipal workers depend on the agreement's provisions and the resulting legal position, and it remains unclear whether the parties will negotiate a replacement agreement.
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