One city in South Africa that owes more money than it makes

Matjhabeng Local Municipality in the Free State is the only municipality in South Africa whose debt exceeds its income.

This is largely due to a concessionary loan given to Matjhabeng in 2024 as part of the National Treasury’s municipal debt relief programme.

In recent years, this municipality has come under fire for severe service delivery problems and corruption allegations.

Statistics South Africa (Stats SA) recently revealed that Matjhabeng has a debt-to-income ratio of 137.5%, making it the only municipality in the country to surpass 100%.

The agency attributed this to a R5.3 billion concessionary loan from the National Treasury, which resulted in a spike in Matjhabeng’s formal debt level.

The Treasury’s municipal debt relief programme was launched in March 2023 to support municipalities that are in severe debt to Eskom.

Over the past few years, municipal debt owed to Eskom has spiralled out of control, with the total figure expected to reach R300 billion by 2030.

Therefore, the Treasury introduced this programme to help struggling municipalities by writing off their debt in equal tranches over three years, dependent on certain conditions.

This was the case for Matjhabeng, which is why the municipality has seen its debt-to-income ratio skyrocket over the past year.

However, Stats SA noted that this ratio does not account for unpaid bills to Eskom and other suppliers.

The agency explained that Matjhabeng’s high debt-to-income ratio drove up the Free State’s ratio, making the province a clear outlier among the country’s other municipalities as it saw a sharp spike.

Between 2021 and 2024, the Free State’s debt-to-income ratio jumped from 4.9% to 23.8%.

In comparison, Gauteng, home to economic municipal heavyweights like Johannesburg, Tshwane and Ekurhuleni, saw its ratio decrease from 30% to 20.2% over the same period.

Stats SA said Matjhabeng’s significant debt burden was the main driver for the Free State’s spike. If the municipality’s loan is removed, the Free State’s ratio is strikingly lower at 2.7% in 2024.

The graph below, courtesy of Stats SA, shows how South African provinces’ debt-to-income ratios have changed between 2021 and 2024.

Matjhabeng under fire

Matjhabeng has come under fire recently for service delivery failures and allegations of corruption linked to a R14 million tender.

On 30 September 2025, the Democratic Alliance (DA) said it would escalate the ongoing service delivery failures in Matjhabeng to the MEC of the Department of Cooperative Governance and Traditional Affairs (COGTA).

The party said it would demand “urgent corrective measures and accountability”.

“Despite the municipality being placed under administration in terms of Section 139 of the Constitution, residents continue to endure worsening conditions, indicating that the intervention has thus far been unsuccessful,” the DA said.

“Residents are left to suffer the devastating consequences of a municipality that has collapsed under the weight of mismanagement, maladministration, and a lack of political will to govern effectively.”

The party highlighted several service delivery failures in the municipality, including severe and prolonged water shortages, raw sewage spills, and a lack of refuse collection due to an employee strike over overtime compensation.

“To compound matters, there is little to no response to the backlog of streetlight repairs and other essential services, plunging neighbourhoods into darkness and insecurity,” the DA said.

“The people of Matjhabeng cannot continue to live without water, surrounded by refuse and sewage, while their constitutional rights are trampled.”

City Press reported that the National Treasury’s Municipal Financial Recovery Services (MFRS) also recently uncovered corruption at Matjhabeng.

The MFRS revealed that Matjhabeng had spent around R14 million to fund an illegal expanded public works programme support unit.

It also exposed irregular appointments at the municipality, leading to over R10 million in unauthorised and wasteful expenditure.

These findings prompted ActionSA Free State Chairperson Patricia Kopane to call Matjhabeng “one of the most financially distressed municipalities in the country”.

Kopane said Matjhabeng is “unable to pay service providers on time, failing to deliver basic services to residents, and drowning in debt”.

“Yet, instead of addressing these urgent challenges, the municipality has prioritised awarding multi-million-rand contracts without clear justification or proper oversight,” she said.