South African municipalities owe R2 billion in unpaid pension funds

South African municipalities owe approximately R2 billion in unpaid pension fund contributions, according to Finance Minister Enoch Godongwana. He disclosed the figure in response to a parliamentary question from Andrew Bateman, Member of the National Assembly, who asked for the total amount of employee deductions not paid over to pension funds, a per-municipality breakdown, the steps National Treasury had taken to hold those responsible accountable, and the reasons for the late payments. The question followed a recent report to the Standing Committee on Appropriations, published under section 71 of the Municipal Finance Management Act (MFMA) and section 30(3) of the Division of Revenue Act, which showed municipalities owed R691.1 million in the second quarter ended 31 December 2025.

Godongwana said the R2 billion figure, as of 30 June 2026, came from information the Financial Sector Conduct Authority (FSCA) provided to the National Treasury. It represents salary deductions from employees that were not remitted to their relevant pension funds. The Free State was the largest defaulter, with 18 of its 21 local municipalities owing a combined R1.5 billion, or 75% of the total. The North-West owed R340 million and the Northern Cape R132 million. The Western Cape owed the least, with only Beaufort West Local Municipality found to owe R2,257.

The Minister said the National Treasury considers non-remittance a breach of section 65(2)(f) of the MFMA. Treasury is engaging municipalities that defaulted on contributions of R2 million or more and checking whether formal payment arrangements are being honoured. Where no agreement exists or an agreement is not being complied with, Treasury may invoke section 216(2) of the Constitution to withhold or delay transfers of a municipality's equitable share allocation. Release of withheld funds would require a credible and affordable payment agreement with the pension fund, plus proof of payment of the amount that agreement requires.

Godongwana added that municipalities are responsible for investigating potential financial misconduct and for disciplinary or other corrective action against officials implicated in non-compliance. Treasury will support consequence management in collaboration with provincial treasuries. Quoting the Minister directly, he said: "Municipalities are not paying pension deductions to the pension funds on a regular basis," describing this as "an indication of systemic failure to remit pension fund contributions within the prescribed timeframes."