Treasury warns Johannesburg over illegal wage deal and funding cuts

Key topics:Treasury threatens to cut Johannesburg fundingIllegal wage deal risks city financial stabilityFunding crisis intensifies before local elections.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Antony Sguazzin and Bonolo Mokonoto.South African Finance Minister Enoch Godongwana told Johannesburg Mayor Dada Morero that state funding to the city will be halted unless a 10.3 billion-rand ($629-million) wage agreement is scrapped. The two-year pact with the South African Municipal Workers Union was signed illegally, Godongwana said in a letter dated April 23 seen by Bloomberg. The minister confirmed sending the letter when contacted by text message.“You are hereby directed to stop proceeding with the implementation of this illegally signed agreement that has the potential to destroy the sustainability of the City of Johannesburg,” Godongwana wrote. “You very well know this city can’t afford this agreement.”The threat to withhold government funding comes as Godongwana works to restore confidence in national finances, even as the African National Congress — of which both he and Morero are party members — struggles to improve governance at the municipal level. Public anger over poor service delivery cost the ANC support during elections in 2024, when the party lost its parliamentary majority for the first time since the end of apartheid. The issue remains a key source of frustration among voters facing water and electricity outages in towns and cities such as Johannesburg, where the ANC is the biggest party. .Local Elections.The warning to slash funding from July comes before municipal elections scheduled for Nov. 4 and adds to a litany of mismanagement and corruption scandals that have beset South Africa’s biggest city.The Democratic Alliance, South Africa’s second-largest political party, was quick to take advantage.“Basically what the minister says is Johannesburg is bankrupt,” DA mayoral candidate and former party leader Helen Zille told reporters in Johannesburg on Wednesday afternoon. “It explains why nothing can be done” to fix the city’s crumbling infrastructure, she said.The city owed 25.2 billion rand at the end of the 2024-25 financial year, while only having cash in hand of 3.9 billion rand, Zille said. If Godongwana makes good on his threat, that would result in the withdrawal of 8 billion rand in funding — about a 10th of the city’s budget, she said.The DA is projected to win 39% of the vote in the municipal elections, compared with 30% for the ANC, according to a March poll by the Social Research Foundation. In the last municipal elections in 2021, the ANC won 34% and the DA 26%. The DA is not part of the administration currently in charge of Johannesburg, though it is a member of the national coalition that governs the country — alongside the ANC..Wasted Money.City of Johannesburg spokespeople didn’t answer calls made to their mobile phones.In his sharply worded letter, Godongwana listed a series of regulatory and legislative violations he says have been committed in the city that’s home to 4.8 million people. Those include revenue targets not being met, creditors not being paid on time and opaque city finances. He also said the city failed to address the unauthorized and wasteful expenditure his ministry warned about last year.Last month, Moody’s Ratings placed the city’s Ba3 credit rating on review for a possible downgrade, after the Johannesburg Stock Exchange suspended the municipality’s debt securities over its failure to publish audited financial statements.Zille said that if Godongwana carried out his threat to withhold the funds “it will be the final nail in the city of Johannesburg’s coffin.”.© 2026 Bloomberg L.P.

Treasury warns Johannesburg over illegal wage deal and funding cuts

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