South Africa’s towns and cities in trouble

Many of South Africa’s municipalities are in trouble, and addressing their challenges will take targeted reforms in governance, finance, infrastructure, and service delivery.

In his 2025 State of the Nation Address, President Cyril Ramaphosa acknowledged that service delivery is lacking in many municipalities across the country.

“In many cities and towns across the country, roads are not maintained, water and electricity supply is often disrupted, refuse is not collected, and sewage runs in the streets,” he said.

“In part, this has happened because many municipalities lack the technical skills and resources required to meet people’s needs.”

The president explained that many municipalities have not reinvested their revenue from these services to maintain their infrastructure. 

To address the decline of South Africa’s municipalities, the president announced a new initiative, starting this year, whereby the national government will work with municipalities.

They will establish professionally managed, ring-fenced water and electricity services utilities to ensure adequate investment and maintenance. 

“Many of the challenges in municipalities arise from the design of our local government system,” Ramaphosa said.

“We will therefore undertake extensive consultation to develop an updated White Paper on Local Government to outline a modern and fit-for-purpose local government system.” 

He said the national government will review the municipalities’ funding model, as many lack a viable and sustainable revenue base.

In addition, the government will continue to work with traditional leaders in the implementation of local development programmes.

“We will expand our support to municipalities that require assistance, drawing on the lessons of the Presidential eThekwini Working Group,” he said.

“We are seeing great progress in eThekwini as we implement the district development model, which enables all key role players in government, business, labour and community-based organisations to work together.”

The Bureau for Economic Research (BER) said this plan is an encouraging sign. However, in a recent research note, the organisation cautioned against taking a “one-size-fits-all” approach to local government.

In a research note published in December 2024, the BER’s Impumelelo Growth Lab outlined all the challenges local governments face.

South Africa has around 257 municipalities – 205 local, 44 district, and 8 metros – responsible for delivering essential services. 

However, senior economists Helanya Fourie and Roy Havemann said many of these municipalities are underperforming, limiting their ability to contribute to economic growth and job creation. 

The economists highlighted that not all municipalities face the same problems, and their financial stability depends on local economic conditions.

For example, urban municipalities typically have higher budgets per capita than rural ones.

To illustrate this disparity, they pointed out that the Western Cape budgets around R17,920 per person in a municipality, whereas Limpopo budgets an estimated R5,838 per person.

The economists explained that a uniform approach to municipal reform would, therefore, not work due to these disparities. 

Urban municipalities, especially metros and secondary cities, should go beyond service delivery and focus on economic development.

Rural municipalities, on the other hand, have different needs and face greater financial constraints.

Municipalities in South Africa rely on two main national revenue sources:

• Equitable share transfers (for basic services).
• Conditional grants (for specific infrastructure projects).

However, many municipalities lack the administrative and technical capacity to manage these funds efficiently, leading to mismanagement and corruption.

In addition, many municipalities struggle with rising debt due to non-payment of services, particularly for electricity and water.

Near the end of last year, Finance Minister Enoch Godognwana revealed that South African municipalities owe bulk suppliers R118.7 billion, of which R90 billion is owed to Eskom.

The BER’s economists explained that South Africa’s Free Basic Electricity (FBE) program provides indigent households with 50 kWh of free electricity.

However, the average household consumption is 200 kWh/month, and many households cannot afford the excess, leading to rising municipal debt.

This lack of revenue means municipal capital expenditures are declining, with projected spending at just 10% of total local government expenditures for 2024/25.

Infrastructure spending also varies considerably by region. For example, in the Western Cape, municipalities will spend an average of R2,860 per person on capex in 2024/25. 

In contrast, Gauteng, at R1,055 per person, will spend less than half of this amount, which is especially concerning in light of the province’s water crisis.

Capital spending is typically funded through the Municipal Infrastructure Grant (MIG), which was introduced to improve service delivery and address infrastructure backlogs.

However, the BER said this grant is underutilised due to poor oversight and mismanagement at municipalities.

Aside from funding, municipalities also lack the technical expertise to properly invest in and maintain their infrastructure.

The BER pointed out that municipalities have a severe shortage of engineers, affecting infrastructure maintenance and service delivery.

“Engineers are vital for designing, implementing, and maintaining infrastructure like water systems, electricity distribution, roads, etc. – the foundations of an economy,” they said. 

“The shortage of engineering expertise delays capital spending and project implementation and compromises the quality and sustainability of infrastructure projects.”

“Municipalities struggle to plan effectively, oversee contractors, or do maintenance without skilled engineers, leading to escalating costs and backlogs.”

They explained that engineering skills are needed to ensure that projects are executed efficiently and cost-effectively. 

However, they said one of the biggest problems with national government interventions in local municipalities is that the government lacks high-frequency data on municipal service performance.

“We do not have high-frequency data about the availability and reliability of basic services across different municipalities,” they said. 

“We often rely on the media to learn about problems or repairs.” 

They said Operation Vulindlela – the joint initiative by the Presidency and National Treasury to accelerate structural reforms with a particular focus on local government in its second phase – should make tracking progress easier.

This will allow the government to hold municipalities accountable and give credit where credit is due. 

“It should also look for creative ways to understand what is happening at the grassroots level,” they said.