Municipal Creditors Hit R185 Billion: Section 71 Q4 Report
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There is nothing in National Treasury's fourth quarter Section 71 report that will surprise anyone who works with a municipal client. We already knew collections were weak. We already knew suppliers were waiting. CIBA reported it in June when the third quarter numbers came out, and again in July when Treasury withheld equitable share transfers from 69 municipalities.
What this report does is formalise it. Released on 16 September 2026, it closes off the full 2025/26 financial year for 257 municipalities and puts an audited-style number on what practitioners have been managing around all year. That matters, because a confirmed figure is something you can put in a working paper, a cash flow forecast and a fee conversation.
The headline numbers
Municipalities adjusted their revenue budgets up from R706.6 billion to R718 billion. They billed R677.8 billion, or 94.4 per cent of budget.
Billing does not work, as Municipalities do not seem to be collecting. A collection rate of 72.8 per cent was budgeted but they only collected 63.9 per cent of what they billed.
Operating expenditure was R587.3 billion against a R630.8 billion budget. Salaries and wages, including remuneration of councillors, were R164.9 billion in the fourth quarter, representing 95.7 per cent of the R172.2 billion adjusted budget. The salaries and wages budget constituted 27.3 per cent of the R630.4 billion adjusted operating expenditure budget..
Capital expenditure was R65.3 billion against R83.9 billion budgeted, leaving R18.6 billion of infrastructure spending that never happened. Treasury blames weak planning and projects that were not ready to start.
Consumer debt owed to municipalities sits at R484.5 billion, with R427.2 billion of it older than 90 days. Households owe R341.3 billion, businesses R107.7 billion and organs of state R26.2 billion. Only R8.2 billion was written off. Fifty five municipalities reported negative cash balances.
Did it get better or worse than last quarter?
Some aspects got better, some worse, depending on where you look.
Spending accelerated in the fourth quarter. Capital expenditure was at 49 per cent at the end of March and finished the year at 77.8 per cent. Revenue moved from 72.6 per cent to 94.4 per cent, while municipal conditional-grant spending increased from 52.2 per cent to 73.1 per cent. Treasury’s Q3 report noted that capital expenditure typically starts slowly and spikes in the fourth quarter; the Q4 report nevertheless says the final capital underspend highlights weaknesses in planning and project readiness.
Debt held flat but aged. Consumer debt was R484 billion at 31 March and R484.5 billion at 30 June. Over 90 day debt moved from 87.7 to 88.2 per cent of the book. Year on year, total consumer debt increased from R427.7 billion to R484.5 billion.
Creditors got much worse. This is the real story. Municipalities owed R148 billion to creditors at 31 March. By 30 June that had jumped to R185.2 billion, an increase of R37.2 billion in a single quarter. Bulk electricity rose by R20.5 billion to R99.9 billion. Trade creditors rose by R12.7 billion, or 41.9 per cent, to R43.1 billion. Of the total owed, R142.4 billion is more than 90 days old. The Free State remains the worst province at R42.6 billion past 90 days, followed by Mpumalanga and Gauteng.
Put simply, municipalities spent hard in the fourth quarter without collecting the cash to pay for it. Suppliers absorbed the difference.
Why this matters for the economy
R43.1 billion in trade creditors represents amounts owed by municipalities to suppliers. Delayed payment can put pressure on the working capital and cash flow of those businesses. The Section 71 report does not break this amount down by supplier size or sector.
The R18.6 billion capital underspend represents capital expenditure that was budgeted but not spent by year-end. Treasury says the poor performance highlights weaknesses in planning and ensuring that projects are ready for implementation.
What this means for your work
More than three-quarters of municipal creditors were outstanding for more than 90 days at year-end: R142.4 billion, or 76.9 per cent of total creditors. Treasury also notes that municipalities are required to settle outstanding debt within the stipulated 30 days. That changes your client's cash flow forecast, overdraft requirement and impairment assumptions. Where municipal work is a large share of turnover, it may change your going concern assessment.
Practical takeaway
Do three things this week:
Run a debtor age analysis for every client with municipal exposure and flag anything past 60 days.
Check that each municipal engagement has a clean paper trail of the quotation, purchase order, contract or tender documentation and evidence of compliance with the applicable supply-chain requirements. Treasury identifies persistent Supply Chain Management challenges as one of the factors affecting municipal grant performance.
Reprice the work. Guiding a client through municipal payment risk is risk advisory, not data capture. Bill it that way.
👉 Join CIBA and we'll show you how to turn municipal payment risk into advisory income your clients will pay for.
