Intergovernmental transfers from the national fiscus to municipalities via the Local Government Equitable Share (LGES) grant cover the operational costs of providing a minimum level of basic services to households registered as indigent in the municipality in which they reside, at no direct cost to them. High levels of unemployment, poverty and inequality compromised both the ability of indigent households to pay for basic services, and the municipality’s ability to collect revenues due to them and hence municipal financial sustainability.

The LGES grant is based on an affordability threshold used to estimate the number of households need FBS) which was originally set at the value of two old age pensions in 2011 when the FBS policy was first introduced. In 2026, the current value of this affordability threshold is R 4 790 per month. Statistics SA has calculated that 59% of all South African households fall below this affordability threshold used in the LGES. Municipalities set their own income thresholds for households to receive FBS in their indigent policies, and these may differ from the LGES affordability threshold, which is not an official poverty line. Since the LGES grant is unconditional and not earmarked for the FBS programme, municipalities may structure their indigent policies and indigent registration conditions in a manner in which fewer households are provided with FBS than funded through the LGES. If this is the case, municipalities are required to explicitly articulate why this choice was made and how communities were consulted. In practice, these explanations are frequently absent from budget documentation.

In an article titled “Funding Free Basic Services through the Local Government Equitable Share: A Case Study of the City of Tshwane Metropolitan Municipality,” we raised searching questions about the FBS policy framework, which has not been comprehensively reviewed since its inception in 2001. One of the main questions we aimed to explore was why such large variations exist between LGES allocations for FBS and actual municipal spending on the programme. The study found that unclear definitions of indigency and reliance on outdated indigent registers which fail to capture many qualifying households, particularly backyard dwellers, pose the primary challenges for implementation. The Revised Draft White Paper on Local Government (2026) reinforces this finding, arguing that the current system relies too heavily on household-by-household means testing, which is administratively burdensome and often exclusionary. Crucially, the research suggested that finances are not the primary constraint limiting FBS coverage; rather, it is a systemic failure of indigent registration administration and data integrity.

Commending the 2025 Joint Circular: A shift toward accountability

In September 2025, the National Treasury, in collaboration with the Department of Cooperative Governance (DCoG), published a landmark Joint Circular that starts to address these challenges. We commend the National Treasury and DCoG for this intervention, which finally introduces "teeth" to FBS oversight. The Joint Circular confirms our research findings: while 11.2 million indigent households are currently funded through the LGES nationally, only 2.8 million are accounted for in municipal indigent registers. This suggests that 8.4 million households are being denied free basic services while municipalities receive the subsidies intended for them.

The efforts being made to strengthen the spending of the Basic Services Component of the LGES by placing sanctions on municipalities are a considerable way forward. The threat to invoke Section 216(2) of the Constitution to withhold the December 2025 LGES tranche for municipalities that fail to submit credible indigent registers is a necessary step in ensuring that poor households are provided with basic services as was envisaged by the Constitution. Our study also points out the absence of a comprehensive monitoring and evaluation system across all FBS sectors and all dimensions of the programme. Establishing such a system is critical for timeous corrective action so that sanctions like this are used only as a last resort, and to ensure effective legislative and community oversight over FBS provision.

Reiterating the call for a comprehensive policy review

Despite being a crucial intervention in poverty reduction, the national FBS policy has over time drifted out of touch with current social, economic, and technological conditions. To ensure the programme remains relevant, we reiterate our call for a comprehensive review of the current system. This review must move beyond the 2001 definition of "basic service" to reflect the realities of 2026. In line with the Revised White Paper’s proposals, this review should explore more objective and administratively feasible targeting methods, such as property value bands and service-level targeting, to ensure that no qualifying household is left behind.

What is considered “basic” must evolve in line with the UN Sustainable Development Goal’s emphasis on affordable, universal broadband as essential to inclusive digital transformation and bridging the digital divide. We call for the expansion of the FBS basket to include digital access, such as Wi-Fi hotspots, recognising that connectivity is now essential for economic and educational inclusion. Furthermore, municipalities must be assisted by a centralised, innovative IT platform to manage indigent registers. Such a platform should be integrated with national databases, like SASSA, to automate the identification of the poor and remove the exclusionary administrative barriers that currently prevent the most vulnerable from registering. This aligns with the White Paper’s vision for a 'Municipal Digital Backbone', a centralised, integrated data platform that ensures transparency and downward accountability to communities. Such a system would not only improve the integrity of indigent registers but also facilitate the rollout of digital access as a core component of modern municipal service delivery.

This is not a call for more funding, but rather a call to modernise the policy and improve the implementation of the FBS programme in the context of changing dynamics. The Joint Circular is an important short-term fix, but a full policy realignment is required to ensure that the "equitable share" truly reaches those it is meant to benefit.

By Elellwang Matlali & Tania Ajam