Key Takeaways
- Finance Minister Enoch Godongwana warned Johannesburg Mayor Dada Morero that the city’s budget is unfunded and the municipality is in severe financial distress.
- Creditors are owed R25.2 billion, while cash and cash equivalents stand at only R3.9 billion for 2024/25, leaving a liquidity gap of roughly R21.3 billion.
- The wage agreement with SA Municipal Workers Union (Samwu) committing R10.3 billion over two years is deemed unfunded and potentially illegal under the Municipal Finance Management Act (MFMA).
- Revenue collection is falling short, Johannesburg Water overstated income, and the city has overspent R3.9 billion on staff costs, electricity bulk purchases, inventory and operations by end‑January.
- The equitable share allocation from National Treasury was cut from R979 million to R455.9 million, and the Johannesburg Roads Agency’s R708‑million capital budget lacks actual funding.
- Opposition parties, labor unions and civil society have criticised both the minister’s austerity stance and the city’s fiscal mismanagement, warning of deteriorating services for six million residents.
- Moody’s placed the city’s credit rating on review for a possible downgrade, the JSE suspended its debt instruments, and the French development funder AFD rejected a loan request, signalling broader market concerns.
Financial Minister’s Warning
Finance Minister Enoch Godongwana issued a second letter in less than a year to Johannesburg Mayor Dada Morero, explicitly stating that the city’s budget is unfunded and that the municipality is experiencing severe financial distress. The minister highlighted that the city’s cash and cash equivalents of R3.9 billion for the 2024/25 fiscal year are insufficient to meet creditor obligations amounting to R25.2 billion. He described this liquidity shortfall as a clear marker of financial distress, indicating that Johannesburg lacks the resources to pay its creditors in the near term.
Unfunded Wage Agreement
Godongwana pointed out that the wage agreement signed between the city and the South African Municipal Workers Union (Samwu) – committing R10.3 billion over two years to settle a wage dispute – is unfunded. The deal was concluded by Mayor Morero to avert strikes ahead of the G20 summit, but the Democratic Alliance (DA) has already taken the matter to court. The finance minister characterised the agreement as “illegally signed” and warned that its implementation could jeopardise the city’s fiscal sustainability and harm the national economy.
Creditor Debt and Liquidity Shortfall
According to the letter, creditors are presently owed R25.2 billion, up from R17 billion at the close of the 2022/23 financial year. With only R3.9 billion in cash and cash equivalents available for 2024/25, the city faces a liquidity deficit of roughly R21.3 billion. Godongwana stressed that this gap demonstrates the municipality’s inability to meet its short‑term obligations, a situation that contravenes the MFMA and budget‑reporting regulations.
Revenue Collection Shortfalls
The minister’s correspondence also notes that Johannesburg’s revenue collection is not meeting targets. Johannesburg Water has overestimated its revenue projections, contributing to a shortfall in expected inflows. These revenue gaps exacerbate the city’s inability to cover operating costs and debt repayments, further straining an already precarious fiscal position.
Specific Overspend Areas
By the end of January, the city had overspent by R3.9 billion across several categories: staff costs, electricity bulk purchases, inventory, and general operations. This overspend indicates that expenditures are outpacing both budgeted allocations and actual revenue inflows, pushing the municipality deeper into fiscal imbalance and limiting its capacity to service existing debt.
Equitable Share Cuts and Capital Budget Issues
National Treasury reduced Johannesburg’s equitable share allocation from R979 million to R455.9 million, a cut that removes a significant source of recurring revenue. Compounding this, the Johannesburg Roads Agency had budgeted R708 million for capital expenditure, yet the funds were not actually available in the bank. The mismatch between planned capital spending and available cash raises concerns about the city’s ability to maintain infrastructure and deliver essential services.
Responses from Opposition and Labor
Rise Mzansi’s Makashule Gana accused the city of “playing politics and cutting corners to everyone’s demise,” warning that residents, employees, and businesses would continue to suffer from unsafe streets, leaking pipes, uncollected refuse, and crumbling roads. Cosatu’s Greater Johannesburg region condemned Godongwana’s approach, claiming he prioritises fiscal austerity over workers’ livelihoods and disregards collective bargaining agreements. The union threatened to escalate the dispute to the highest levels of struggle if the National Treasury does not honour the wage deal.
Impact on Residents and Services
The combined effect of revenue shortfalls, overspending, and reduced transfers threatens the quality of basic services for Johannesburg’s six million residents. Potential consequences include deteriorating road conditions, intermittent water supply, unreliable refuse collection, and compromised public safety. Labor unrest, fueled by the unfunded wage agreement, could further disrupt municipal operations and exacerbate service delivery challenges.
Credit Rating and Market Actions
In April, Moody’s placed Johannesburg’s credit rating on review for a possible downgrade, reflecting heightened perceived risk. The Johannesburg Stock Exchange suspended the city’s debt instruments, describing the move as a technical issue being resolved with the Auditor‑General. Additionally, the French development agency AFD rejected a loan request from the city, signalling that external lenders are wary of extending credit amid the municipality’s fiscal uncertainties.
Conclusion and Outlook
Finance Minister Godongwana’s letter underscores a dire fiscal situation for Johannesburg: unfunded obligations, insufficient liquidity, revenue deficits, and problematic expenditure patterns. The unfunded wage deal with Samwu sits at the centre of the controversy, drawing legal challenges and union opposition. Unless the city implements credible measures to reverse the unfunded commitments, improve revenue collection, align spending with realistic cash flows, and secure alternative financing, it risks further deterioration of services, a credit‑rating downgrade, and broader economic repercussions. Stakeholders across government, labour, and civil society will need to cooperate urgently to restore fiscal stability and protect the wellbeing of Johannesburg’s residents.