South African municipalities owe R2 billion in unpaid pension funds

South Africa’s municipal pension system has come under renewed scrutiny, with municipalities owing approximately R2 billion in unpaid pension fund contributions.

This was revealed by the Minister of Finance, Enoch Godongwana, in response to a parliamentary question from Member of the National Assembly Andrew Bateman.

Bateman asked the Minister to disclose the total amount of funds deducted from employees but not paid over to the Pension Fund, alongside a breakdown per municipality.

He also requested the steps the National Treasury had taken to hold those responsible for late payments accountable, and the reasons why pension payments had not been paid on time.

Bateman asked this in light of a recent report to the Standing Committee on Appropriations, revealing municipalities owed R691.1 million in pension funds in the second quarter ended 31 December 2025.

This report was published under section 71 of the Municipal Finance Management Act (MFMA) and section 30(3) of the Division of Revenue Act.

In his response, Godongwana said municipalities across South Africa owed a collective R2 billion in unpaid pension fund contributions as of 30 June 2026.

This, he said, was according to information provided to the National Treasury by the Financial Sector Conduct Authority (FSCA).

He explained that the amount in question represented unpaid deductions from employee salaries which had not been remitted to their relevant pension funds.

The Free State was the province that owed the most in unpaid contributions, with 18 of its 21 local municipalities owing a collective R1.5 billion, 75% of the total amount.

This was followed by the North-West, which owed R340 million, and then the Northern Cape, which owed R132 million.

The Western Cape was the province that owed the least in unpaid pension funds, as only the Beaufort West Local Municipality was found to owe R2,257.

National Treasury’s response

Godongwana said the National Treasury considered the non-remittance of pension fund contributions a breach of section 65(2)(f) of the MFMA.

He said the Treasury was currently engaging with municipalities that had defaulted on pension fund contributions of R2 million or more, as reported by the FSCA.

This engagement includes the confirmation of whether the formal payment arrangements had been honoured by these municipalities.

“Where no payment agreement exists, or where an agreement is not being complied with, the National Treasury may invoke section 216(2) of the Constitution as an enforcement measure,” Godongwana said.

“This may include withholding or delaying the transfer of the municipality’s equitable share allocation until specific requirements are fulfilled.”

These requirements would include a submission to the Treasury of a credible and affordable payment agreement entered into with the pension fund owed by the municipality.

This submission would include a proof of payment confirming that the amount required by the payment agreement had been paid to the pension fund.

The Treasury would then release the withheld portion of the equitable share allocation once the municipality has satisfied these requirements.

Additionally, Godongwana said municipalities themselves were responsible for investigating potential instances of financial misconduct.

They are therefore responsible for instituting disciplinary or other corrective actions against officials implicated in non-compliance with legislation and financial management regulations.

Godongwana said the National Treasury would support affected municipalities in implementing consequence management in collaboration with the relevant provincial treasuries.

“Municipalities are not paying pension deductions to the pension funds on a regular basis,” Godongwana said. “An indication of systemic failure to remit pension fund contributions within the prescribed timeframes.”

“The National Treasury continues to engage with the affected municipalities to ensure that outstanding amounts are settled and that future contributions are paid over to the pension funds.”