South Africa’s most important city is bankrupt

South Africa’s richest city and economic hub, Johannesburg, is technically bankrupt, with the Finance Minister threatening to withdraw billions of rands in funding if it does not scrap an unaffordable wage bill. 

The threat was coupled with Finance Minister Enoch Godongwana revealing that the City of Johannesburg currently owes creditors R25.2 billion, while only having R3.9 billion in cash in the bank.

“This is a market of severe financial distress, indicating that the city does not have the liquidity required to pay its creditors,” Godongwana said in a letter to Mayor Dada Morero. 

The Organisation Undoing Tax Abuse’s (OUTA) CEO, Wayne Duvenage, took this a step further in saying that the city is technically and functionally bankrupt. 

“We are in a crisis. We are well beyond the brink. Technically speaking, the City of Johannesburg is bankrupt and does not have a viable financial solution,” Duvenage told Newzroom Afrika. 

The city is unable to tap capital markets for any fresh liquidity, with the JSE suspending trading in its bonds at the end of March due to its failure to publish audited financial statements. 

These statements, for the year ended 30 June 2025, are currently being finalised according to the city, with “technical accounting matters” being resolved. 

“For the first time now, we are seeing a national entity in the Treasury exercise its oversight powers on a local government entity. Which is long overdue,” Duvenage said. 

“This is something the Gauteng Provincial Government should have been looking closely at a year ago or two years ago and should have placed the city under administration.” 

Duvenage explained that despite the province having the powers to act, it has failed to do so due to political relationships among high-ranking ANC members in Gauteng. 

“Out of desperation now, the Finance Minister has fired this salvo at Dada Morero, and it is a clear one. It says, ‘You are out of line as a municipality and as an executive mayor.’”

Johannesburg is still South Africa’s economic hub, with it being home to the head offices of many of the JSE’s largest companies, including the exchange itself. 

The city’s budget of around R90 billion per annum is the largest of any municipality in South Africa and is larger than that of some entire African countries. 

However, a decade of mismanagement and political instability has resulted in the city failing to appropriately spend this budget on service delivery and investment in infrastructure. 

Joburg in crisis

The city has spent much of the growth in its budget over the past decade on consumption, largely in the form of salaries. 

This trend was set to continue, with the city agreeing to R10.3 billion in salary increases for municipal workers over the next two years in November 2025. 

However, Godongwana said this agreement was signed illegally and has the potential to destroy the sustainability of the City of Johannesburg. 

“Not only is your Adjustments Budget not funded in terms of Section 18 of the MFMA, but you very well know the City cannot afford this agreement,” Godongwana said. 

Duvenage said that Godongwana has made it clear that something drastic has to change at the City of Johannesburg to rectify its decline. 

“It is at a crisis point right now. If you cannot raise funds and cannot pay your debtors, something drastic needs to happen,” Duvenage said. 

Godongwana has called on the City to submit a financial recovery plan to the National Treasury, indicating how it plans to raise additional revenue and begin to pay its creditors. 

“They have been fudging the figures and sending improper information to the Treasury. It is a dire situation, and this letter should have come a lot sooner,” Duvenage said. 

However, the ultimate responsibility lies with the mayor of the city and the team he has surrounded himself with, as Johannesburg should never have gotten to this situation.

“He must have seen the deterioration. If he has not, then he is walking around with his eyes closed. The potholes are getting bigger. There are more and more of them. Traffic lights do not work,” Duvenage said. 

“It is dangerous here, and we have become used to this stress. We are used to it in this city. This is not how a modern city, an economic hub that is supposedly world-class, should operate.”

“He is totally out of line. He is totally blinkered, and he needs to go sooner rather than later. I don’t even know if Joburg can wait until the November elections.” 

Duvenage said the city is effectively broke and can no longer provide the level of service delivery that is required for a basic standard of living. 

Morero responds to Godongwana

Morero and the South African Municipal Workers Union (SAMWU) have responded to Godongwana’s letter, with the mayor calling for calm.

The mayor has confirmed receiving the letter last week and has responded to Godongwana, asking the National Treasury for a meeting to sort out the issue.

Morero said that the city is confident it will respond adequately and remains committed to transparency, accountability and sound financial management.

SAMWU has responded more sharply, rejecting Godongwana’s call to scrap the R10.3 billion wage agreement.

The union said the Mininster’s decision amounts to an encroachment into collective bargaining and municipal labour relations.

Furthermore, the union insists the agreement is legal and the result of a long negotiation process to address historical wage disparities among municipal workers, adding that a court can set aside a binding agreement.

SAMWU claims the National Treasury stayed silent when the Democratic Alliance (DA) went to court to block the deal and is now repeating arguments already dismissed by the courts.

It has accused the National Treasury of doing political favours for its allies in the DA after the party suffered what it calls political and legal defeats.

Morero insisted that the municipality continues to exercise effective oversight and control over its financial responsibilities, saying that there is currently “no cause for concern”.

Morero also said officials would be meeting with the National Treasury.