51% of South African municipalities are in severe financial trouble

The Auditor-General’s latest report on the state of South Africa’s municipalities showed that most municipalities face severe liquidity and cash flow problems.

Auditor General (AG), Tsakani Maluleke, released the 2024-25 Consolidated General Report on Local Government Audit Outcomes on Wednesday, 24 June 2026.

She said that while there are some green shoots, municipalities have made limited progress in improving audit outcomes.

“Over the past four years, mayors and councils have made limited progress to strengthen governance and improve service delivery,” she said.

“Residents and businesses continue to experience unreliable service delivery, environmental hazards and deteriorating infrastructure.”

Maluleke highlighted that there were many reasons for concern regarding the state of South African municipalities.

• Only 15% of municipalities in South Africa achieved clean audits

• 38 municipalities representing 24% of the total local government expenditure budget have regressed since 2020/21.

• The audit outcomes and performance of the eight metros continue to decline.

There were some positives, including a substantial reduction in the number of municipalities with repeat disclaimed audit opinions.

“There is a significant increase in unqualified audit opinions to 61% in 2024/25, similar to a level last reached in the 2015/16 financial year,” she said.

“There is also a marked improvement in the timely submission of financial statements, which is at 98%, the highest level in our records.”

She added that it was encouraging that municipalities and national and provincial governments paid attention to the Auditor-General’s messages.

The Auditor General urged municipalities to meet legislative obligations, commit to open governance, and pursue a more collaborative approach to administration.

51% of municipalities face severe liquidity and cash flow problems

A particularly concerning statistic was that 51% of municipalities in South Africa face severe liquidity and cash flow problems.

The Auditor-General’s report showed they had an adverse current ratio, meaning they did not have enough current assets to cover their current liabilities.

A total of 174 municipalities had an adverse liquidity ratio, meaning they did not have enough cash available to pay their creditors

This resulted in service providers being routinely left unpaid, with devastating knock-on effects for local economies.

The financial positions of 62 municipalities were so dire that they either disclosed a going-concern uncertainty or received a modified audit opinion for failing to do so.

Approximately 28 municipalities, predominantly in the Free State and Mpumalanga, lacked sufficient cash at year-end to cover even one month of fixed operating costs.

Another problem is that 116 municipalities approved unfunded budgets, effectively committing to R288 billion in expenditure without any means to finance it.

Michal Groenewald, the Freedom Front Plus’ national chairperson and chief spokesperson on local government, said this is a serious problem.

“This unlawful practice reflects a systemic failure of financial governance. It has become normalised within many administrations,” Groenewald said.

“It demonstrates a disregard for both the South African law and the basic principles of responsible governance.”