A recent Auditor-General (AG) report noted that the Matjhabeng Local Municipality is technically insolvent, despite being the province’s third-richest area in terms of taxpayers.
Matjhabeng Municipality is a local municipality within the Lejweleputswa District Municipality, in the Free State province of South Africa.
The municipality includes the second largest city in the province, Welkom, and other towns such as Virginia, Odendaalsrus and Allanridge.
The municipality covers an area of 5,155 square kilometres in the goldfields of the central Free State, north of Bloemfontein and south of Kroonstad.
The area is also well known for its mining, with a string of mining towns that runs from the northwest to the southeast parts of the municipality. This means the municipality has a relatively high-earning population.
According to the latest tax statistics published by the South African Revenue Service (SARS), the municipality has 53,826 registered taxpayers with an average taxable income of R319,602 a year, or roughly R26,634 a month.
That is higher than the average taxable income across the entire province, which is R296,560 annually, or about R24,713 per month.
Only Mangaung Metropolitan Municipality and Metsimaholo Local Municipality report higher average taxable incomes, at R324,008 and R343,482, respectively.
Despite this relatively higher earning taxpayer base, Auditor-General Tsakani Maluleke has warned that the municipality is technically insolvent.
In her latest audit report dated 11 February 2026, Maluleke issued a qualified audit opinion and said her office could not verify several critical figures because the municipality failed to provide reliable supporting information.
The report showed that Matjhabeng recorded a deficit of R871.6 million during the financial year, while its liabilities exceeded its assets by R5.8 billion.
The municipality also owed more than R1.58 billion to Eskom and over R6.84 billion to Vaal Central Water, with both accounts long overdue.
Maluleke noted that the municipality achieved only 61% of its planned targets despite spending 117% of its budget during the reporting period.
Collapse in public services
The report identified extensive failures in financial controls. The auditor-general could not confirm R1.28 billion in water and electricity revenue because the municipality relied heavily on estimated billing rather than actual consumption figures.
Electricity and water losses totalling more than R723 million could not be verified due to inadequate tracking of units sold. Debt impairment, representing money unlikely to be recovered, exceeded R6.7 billion.
The report further highlighted multiple errors in cash flow reporting and insufficient evidence for R135.6 million in changes to net assets.
Maluleke also flagged growing concerns about the municipality’s ability to continue operating as a going concern.
Unauthorised expenditure reached R946.3 million, while fruitless and wasteful expenditure totalled R151.7 million.
Most of this came from interest and penalties incurred because creditors were not paid on time. Irregular expenditure linked to supply chain management failures amounted to R95.8 million.
The financial collapse has increasingly translated into deteriorating service delivery across the municipality.
Pothole repairs fell far short of targets, with only 12% of planned repairs completed in the western region and just 8% in the eastern region.
Sanitation performance was equally poor. Only 14% of household and business waste removal backlogs were addressed within 48 hours, despite a target of 100%.
Electricity infrastructure projects have also stalled. Only 13% of work on a planned substation was completed against a target of 70%.
Provincial authorities have warned that national intervention may become unavoidable if urgent recovery measures are not implemented.
Parliament’s Portfolio Committee on Water and Sanitation has also expressed concern over the municipality’s growing debt and questioned whether its political and administrative leadership is capable of honouring repayment agreements.
Committee chairperson Leon Basson described the municipality’s conduct as “unacceptable” and warned that its dysfunction threatens economic growth, the sustainability of water boards and access to water across the Free State.
The committee has also cautioned against handing recently refurbished wastewater treatment plants back to the municipality without safeguards, warning that governance failures could undermine the costly intervention.
Basson further warned that poor project management and continued underinvestment in infrastructure across municipalities and water boards would continue driving financial losses and service delivery failures.
