The four ways South Africa can stop its municipalities from collapsing
South African municipalities require urgent and targeted interventions to address deeply rooted systemic issues hindering their effectiveness and ability to drive economic growth and create jobs.
This is outlined in a recent research note from the Impumelelo Economic Growth Lab in Stellenbosch University’s Bureau for Economic Research.
The document’s authors, Helanya Fourie and Roy Havemann, said that “municipalities are key service delivery agents, but if done right, they can do much more to accelerate economic growth and create jobs.”
“Our metros and cities should become engines of economic growth and provide the scaffolding for businesses to prosper and attract investment,” they added.
However, challenges undermine their effectiveness and have profound social and economic consequences.
Now, local municipalities are focused on the second phase of Operation Vulindlela (OV2.0), a joint initiative by the Presidency and National Treasury aimed at accelerating structural reforms to drive rapid, inclusive growth.
Consequently, Fourie and Havemann said that a “one-size-fits-all” approach to addressing poor performance in local government is unlikely to be effective.
This is because municipalities face diverse challenges, shaped by factors like varying income levels and service delivery costs across urban and rural areas, requiring targeting interventions.
The problems
The report discusses several key problems challenging the effectiveness of local governance in South Africa, which include:
| Issue | Description |
|---|---|
| Financial distress | Many municipalities face mounting debt and a culture of non-payment for services, especially electricity and water, impairing their ability to function. Free basic electricity exceeds allocated usage, adding to unpaid bills. |
| Underinvestment in infrastructure | Declining capital expenditure hampers infrastructure development and maintenance. The underutilisation of the Municipal Infrastructure Grant (MIG) due to mismanagement and weak oversight worsens the situation. |
| Shortage of technical skills | A lack of skilled personnel, particularly engineers, delays project implementation, reduces quality, increases costs, and undermines sustainability. |
| Ineffective interventions | The current intervention framework for struggling municipalities is inadequate. Interventions often come too late, administrators’ roles lack clarity, and the process is vulnerable to political interference. |
| Political interference | Political instability, driven by hung councils and coalition governments, leads to interference in administrative processes, undermining service delivery and accountability. Strengthening the separation of powers and promoting merit-based appointments is suggested. |
| Lack of reliable service delivery data | The absence of consistently updated and reliable data makes it difficult to monitor service delivery, hold municipalities accountable, and identify areas for improvement. |
| Unclear role of district municipalities | The effectiveness of district municipalities meant to assist local municipalities and foster regional development, is questioned. |
| Funding structure inadequacies | The intergovernmental transfer structure, supporting municipalities through equitable share transfers and grants, is often mismanaged due to capacity issues and corruption. The reliance on municipalities to generate additional revenue is problematic, especially in poorer regions. |
Proposals to improve municipal effectiveness
The report offers four key recommendations to address the myriad of challenges hindering South African municipalities.
- Bolstering technical expertise:
The report underscores the urgent need to address the “critical skills gap” in engineering and finance within municipalities.
This shortage has detrimental effects on infrastructure development, project implementation, and sound financial management.
Fourie and Havemann recommend conducting a thorough “skills audit” to gauge the severity of the gap, followed by “targeted recruitment and training initiatives” to attract and retain qualified individuals.
- Curbing political interference:
The research highlights the significant impact of political interference on effective municipal administration.
Fourie and Havemann strengthened the separation of powers between elected officials and administrators, with a particular focus on “insulating the day-to-day administration … from political interference“.
The recommendation includes promoting merit-based appointments, empowering oversight bodies, and enforcing consequences for poor governance or corruption.
This would be through reforms to the Municipal Systems Act and Municipal Structures Act.
- Accelerating trading services reform:
To enhance the efficiency and sustainability of essential services like water and sanitation, as well as electricity, the BER recommends establishing “viable standalone entities for trading services.”
These entities should operate independently from political influence, prioritizing financial sustainability, effective asset management, and a skilled workforce.
- Enhancing municipal intervention framework:
Acknowledging the shortcomings of the current system for intervening in distressed municipalities, the report calls for a comprehensive overhaul.
This includes implementing interventions early, clearly defining the administrator’s role and powers, and ensuring the process is depoliticized and driven by objective criteria.
Fourie and Havemann also stress the need for competent administrators, context-specific intervention strategies, and well-defined exit plans to prevent the recurrence of distress.
Going forward
“If economic growth, job creation and effective service delivery are to be achieved, “municipal capacity and skills must improve, political interference must be curtailed, trading services must be reformed, and the framework for municipal interventions must be refined,” said Fourie and Havemann.
“Further detailed technical assessments are necessary beyond these interventions as part of OV2.0’s effort to improve municipal outcomes.
“Absent these changes, the economic impact of other structural reforms included in Operation Vulindlela will remain muted,” concluded the experts.
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