Business leaders warn of threat to the national economy in South Africa
Business Leadership South Africa (BLSA) warns that the current collapse of local governance poses a serious threat to the national economy ahead of the 2026 elections.
As basic services such as water, electricity, and road maintenance decline, private companies are compelled to invest in their own infrastructure to maintain operations.
This systemic decline, particularly in key economic hubs like Johannesburg, significantly undermines investor confidence and drives capital flight to more stable markets.
Experts suggest that while national utilities have shown some improvement, municipalities struggle with financial mismanagement and a notable lack of professional competence.
BLSA emphasised that meaningful recovery requires urgent political will, strategic partnerships with the private sector, and voter awareness that political stability is essential for economic prosperity.
The organisation stressed that successful reform is an ongoing process of accountability, crucial for South Africa’s growth.
Municipalities are fundamental to local economies, providing the infrastructure, services, and governance necessary for businesses to invest, create jobs, and expand.
However, many regions are grappling with challenges such as declining service delivery, weak financial management, and governance failures, which undermine confidence and hinder economic potential.
In a recent PSG Think Big webinar, BLSA CEO Busisiwe Mavuso highlighted the importance of the upcoming 2026 municipal elections.
“They are important because when you look at the state of our municipalities, a lot of them are seriously eroding, deteriorating, and failing to provide the basic services for which they were designed to provide,” said Mavuso.
Mavuso explained that this has direct implications for business confidence and investment. As municipalities struggle to provide reliable services, companies are increasingly forced to bear the costs of state failures.
“You are seeing businesses having to invest in backup power, in water storage, in road repairs, in private security, in logistics, on alternatives, in infrastructure maintenance, simply to remain operational,” she said.
While the total cost of municipal dysfunction is hard to quantify, Mavuso emphasised that businesses often react by shifting their investments elsewhere.
The effect on businesses
“A lot of businesses quietly choose to disinvest, without making too much noise,” she said.
She highlighted the pressure on manufacturing hubs like Nelson Mandela Bay, where companies have assumed responsibilities that would normally belong to municipalities.
“You have VW, for instance, adopting four substations, which means that if there’s anything wrong with those energy substations, it is VW’s responsibility.”
For multinational companies, this weakens South Africa’s investment case, as investment decisions are made elsewhere in the world rather than in South Africa.
“Remember, capital is not sentimental. Investors allocate capital based on risk. They allocate capital based on stability, predictability, and returns,” she said.
Johannesburg, in particular, has become a central concern. As South Africa’s commercial capital, the city’s decline is no longer a local issue alone.
“Joburg is key to the South African economy. This is where 16% of the country’s GDP is generated. So, its performance is critical to national growth.”
Mavuso said that the city’s decline has reached a level where businesses can no longer remain silent.
This significant challenge has made local government reform a national priority, with the second phase of Operation Vulindlela specifically targeting municipalities.
At the national level, Eskom and Transnet have shown better performance. She highlighted that this improvement should be brought to Johannesburg.
One major focus is ensuring that money from municipal utilities is used correctly. For example, the City of Johannesburg collected R11.9 billion from water services, but only R1.3 billion was spent on water-related projects.
Mavuso said that there remains a need to improve the public service and step in earlier when municipalities are struggling.
The issue extends beyond merely having a solid plan; it also involves possessing the right skills and a sense of accountability.
“Once we have the coalition of the right political parties, it can actually work. And this is where voting matters,” said Mavuso.
She stressed that voters need to recognise the connection between politics and economic outcomes.
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