Cape Town streets ahead of Joburg

Cape Town invests significantly more than Johannesburg in infrastructure, adding to the city’s appeal and further making it a more attractive municipality than South Africa’s economic hub.

Declining and insufficient capital expenditure is a trend seen across South Africa’s municipalities and plays a large role in the country’s infrastructure crisis.

Johannesburg, in particular, struggles significantly with declining and poorly maintained infrastructure, which has manifested in water shortages and electricity problems across the metro.

The Bureau for Economic Research’s Roy Havemann recently outlined the spending trends in South Africa’s municipalities.

This comes after the National Treasury released consolidated municipal spending figures for the municipal financial year ending June 2025.

These figures showed that, as of 30 June 2025, aggregate spending by municipalities accounted for 89.8%, or R597.2 billion, of the total adjusted expenditure budget of R665.5 billion.

Havemann said this indicates ongoing underspending issues. This has been a trend across South Africa’s municipalities for years, despite the dilapidated nature of municipal infrastructure.

He further pointed out that the underspending was concentrated in infrastructure, with capital expenditure at R52.1 billion, or 65.2% of the adjusted capital budget of R79.9 billion. In contrast, operating spending was nearly on target.  

“Low expenditure on infrastructure grants is a source of concern because this slow performance may eventually lead to unspent conditional grants that have to revert to the National Revenue Fund (NRF),” the Treasury previously warned.

“The surrendering of unspent conditional grants to the NRF has negative consequences for the communities that must receive the services linked to the infrastructure to be built.”

Havemann explained that capital expenditure continues to be underspent and accounts for only 8.7% of overall spending. He added that it is also markedly different across municipalities, using Cape Town and Joburg as examples.

The City of Cape Town and the City of Johannesburg metro regions have roughly equal populations, wit around 4.8 million residents each.

Despite this, Cape Town’s capital budget was R12.1 billion in the same year, or 23% of all municipal capital spending, while Johannesburg’s capital budget was R7.1 billion.

Cape Town coming for Joburg’s crown

The effect of Johannesburg’s weaker capital spending compared the Cape Town can be seen in South Africa’s semigration trend.

Cape Town is increasingly becoming a major economic hub in South Africa as the city benefits from better service delivery compared to its peers. 

While Johannesburg remains South Africa’s primary economic hub by some distance, Cape Town is gradually closing the gap.

In the Oxford Economics Global Cities Index for 2024, Cape Town gained ground on Johannesburg as the country’s economic hub suffered from mismanagement. 

Joburg remains the best city in South Africa but dropped to 380th in the world, mainly due to its declining quality of life, which ranks 923rd in the world. 

The declining quality of life is primarily attributed to failures in basic service delivery, from electricity to water and road infrastructure.

This stands in stark contrast to Cape Town’s quality of life, which continues to improve due to enhanced service delivery.

This contrast has given rise to a semigration trend, where an increasing number of Joburg residents are moving to Cape Town in search of a better lifestyle.

While the inverse of this trend has also been seen, called “reserve semigration”, this has largely been attributed to Cape Town’s high and rising property prices rather than improvements in Joburg’s service delivery and infrastructure.

Political analyst Dr Frans Cronje recently warned that Cape Town’s dethroning of Joburg is set to continue and appears to be irreversible.

He explained that, while Johannesburg can bounce back quickly with the right municipal management, Cape Town is set to continue receiving a disproportionate share of investment.

This is because the decline in service delivery from the central government has formed enclaves across the country where private companies supplement or even replace state services.

This leads to greater investment in these enclaves, further increasing their appeal to more South Africans, and resulting in semigration and further investment. 

The further decline in service delivery from the central state pushes more South Africans towards these enclaves. 

As such, a feedback loop is created whereby the increased mismanagement of the central state results in further growth and investment in enclaves.

“I think the Western Cape is one of the world’s great emerging market economies of the next thirty to forty years. Regardless of what happens to the country,” Cronje said. 

“So, if we are successful and the economy grows quickly and South Africa regains its place as a leading emerging market, the head start the Western Cape already has just draws more energy from that.”