Skip to main content
SA Policy Space

Intergovernmental Fiscal Framework Review — Equitable Share Formula

Government CapacityProposedMedium TermRaised 12× in committeeFinance Select Committee (NCOP)

Theme: Intergovernmental finance

First raisedDec 2022Last discussedAug 202612 meetings on the record ↓
Generate BriefCompareFeasibility Matrix

Reform at a glance

What changes
Intergovernmental Fiscal Framework Review — Equitable Share Formula
Responsible actor (recorded)
National Treasury / Financial and Fiscal Commission / COGTA
Recorded status
Proposed — editorial assessment.
Milestone described by this status
Status scope has not yet been independently documented; it may cover only part of this reform.
Next documented milestone
Next milestone not yet documented
Compare shortlist (0/3)
Back to ideas
On this page

Description

South Africa's system of intergovernmental fiscal transfers—governed by the Division of Revenue Act (DoRA), the Intergovernmental Fiscal Relations Act (1997), and the equitable share formula—distributes approximately R900 billion annually between national, provincial, and local government. The equitable share formula for provinces (the largest transfer, R850 billion in 2025/26) has not been fundamentally revised since 2002, and its components—education (weighted by learner numbers), health (weighted by population and poverty), and basic services—no longer align with provincial fiscal needs or service delivery capacity. Key reform proposals from the FFC (Financial and Fiscal Commission): revising the health component to align with actual provincial disease burden (KZN and EC are undercompensated relative to their TB/HIV burden), introducing a conditional infrastructure maintenance grant (ring-fenced from the provincial equitable share to prevent maintenance budget raiding), and strengthening the local government equitable share to reflect the growing service delivery obligations of municipalities. The MTBPS 2025 commits to a comprehensive equitable share formula review to be completed by the 2026 Budget.

Assessment

Growth Impact3/5
Feasibility3/5

Responsible: National Treasury / Financial and Fiscal Commission / COGTA

Feasibility Assessment

Low-medium: Politically very difficult — every formula change creates winners and losers among provinces. FFC provides technical legitimacy but political consensus is the bottleneck. Multi-year process.

Stakeholder Landscape

Who backs this reform, who needs convincing, and which interests or red lines shape political feasibility.

Backers

9

1 stakeholder

Negotiation weight

0

0 conditional actors

Opposition weight

0

0 opposing actors

Coalition Read

AI-drafted stances · 0 reviewed

1 of 38 actors mapped — not scored

A coalition score needs at least 3 mapped stances, or actors carrying 25% of the map's influence. The stances below are the evidence; the average over this few of them would not be.

Anchor: National Treasury.

Political Tractability

—Needs reviewed signals

No reviewed signals · 0% of mapped influence has been reviewed.

Backers1 stakeholder
National TreasuryCoalition anchorInfluence 9/10

Equitable share formula review is an ongoing Treasury mandate to improve intergovernmental fiscal transfers.

Interest: Fiscal consolidation with public debt stabilising below 75% of GDP; structural reforms that improve revenue without expanding contingent liabilities;…

Concern: Unfunded mandates in energy transition (JETP co-financing); Eskom's R400bn+ debt and how restructuring socialises costs; reform proposals that create…

Engagement path: Reforms must be fiscally neutral or revenue-positive over the MTEF window; SOE restructuring must demonstrably reduce contingent liabilities; credible…

OECD

Referenced in OECD Economic Surveys: South Africa

OECD SA Survey (2017, 2020, 2022, 2025). Fiscal consolidation and debt stabilisation recommended across all surveys; the 2025 survey calls for a formal fiscal rule.

A formula unchanged for a decade while SA's demographic and fiscal landscape has shifted is a formula misallocating resources — review is long overdue. — FFC Recommendations Report 2024

Implementation Roadmap

National Treasury, working through the Financial and Fiscal Commission (FFC) and the Budget Council, will complete a comprehensive review of the provincial equitable share formula in time for the 2026 Budget, revising the health component to align with actual disease burden and introducing a ring-fenced infrastructure maintenance grant to prevent provincial maintenance budget raiding. The 2002 formula's education component will be updated to reflect the cost of quality education delivery rather than enrolment counts. A local government equitable share reform will address growing service delivery obligations of secondary cities. Success is measured by the revised formula adopted for the 2026/27 MTEF and all provinces receiving a dedicated maintenance allocation.

1

Financial and Fiscal Commission (FFC) commission formula review: publish technical paper on provincial equitable share formula - health component (TB/HIV burden vs. population count), education component (quality-adjusted cost), and infrastructure maintenance adequacy; engage provincial Finance MECs through Budget Council

Q1-Q2 2025Financial and Fiscal Commission (FFC) / National Treasury
2

National Treasury and FFC publish equitable share formula methodology options paper: model fiscal impact of three formula scenarios (status quo, health reweighting, full quality-adjusted revision) across all 9 provinces; present to Budget Council for political negotiation

Q3-Q4 2025National Treasury Budget Office / FFC
3

Introduce ring-fenced infrastructure maintenance conditional grant in 2026 Budget: provincial allocations based on infrastructure condition indices (DPWI); minimum 1% of asset replacement value; compliance monitored by DPWI and AGSA

2026 Budget (February 2026)National Treasury / Department of Public Works and Infrastructure (DPWI)
4

Revised equitable share formula gazetted in 2026 Division of Revenue Bill: incorporate health burden reweighting and quality-adjusted education costs; update local government formula to reflect secondary city service delivery obligations; Parliamentary process through NCOP

Division of Revenue Bill 2026 (February-April 2026)National Treasury / Parliament (NCOP) / FFC
Timeline

FFC review: Q1-Q4 2025; 2026 Budget adoption: February 2026; revised formula operative: 2026/27 MTEF

Estimated Cost

No direct fiscal cost for formula review (FFC and NT operational budgets); infrastructure maintenance grant: R8-12 billion per year (reallocation within existing provincial equitable share, not new spending)

Required Legislation

Division of Revenue Act (annual - formula revision embodied in DoRA); Intergovernmental Fiscal Relations Act 97 of 1997 (governs consultation process - no amendment required); no new primary legislation needed

Political Feasibility

High feasibility for maintenance grant (widely supported); formula revision is politically contested because reweighting health benefits KZN and EC at cost to wealthier provinces (WC, GP). National Treasury has strong institutional capacity for technical reform. The MTBPS 2025 commitment to completing the review by 2026 Budget creates political accountability.

International Precedents

Australia's GST distribution formula, managed by the Commonwealth Grants Commission, is updated every 5 years based on expenditure need and revenue capacity relativities - considered global best practice in equitable share formula design. Canada's Federal-Provincial Equalization Programme uses a fiscal capacity formula updated annually to reflect economic relativities. Germany's Landerfinanzausgleich incorporates health cost differentials in its allocation formula, providing the technical precedent for SA's disease-burden health component revision.

Evidence & Research

Research corpus →

Links proposed by lexical matching and screened by a calibrated research judge. Follow the paper for the full argument and its caveats.

Policy documents

No linked official-document evidence yet. Coverage is incomplete.

Parliamentary record

12 meetings

Committee sittings this reform was drawn from, most recent first. Each row opens the meeting on this site; the PMG link goes to the source record.

All 12 meetings

Get the Monday briefing by email

— A short weekly digest of what moved in SA policy.

Status History

tracked since Mar 2026
  1. Recorded as Proposed when status tracking began — held since at least Mar 2026.
    Mar 2026

Data as of 2026-10-10 · latest PMG meeting 2026-10-02