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SA municipalities don’t have a funding crisis; they have a spending and leadership crisis

Wayne Duvenage
By Wayne Duvenage
5 Jan 2025
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South African municipalities do not lack funding; they lack financial discipline and effective management. The time for action is now. Residents deserve nothing less.

Recent remarks by Cooperative Governance and Traditional Affairs Minister Velenkosini Hlabisa – about exploring new funding models for failing municipalities – appear to be misguided. These suggestions bypass the root causes of municipal failure, which must be the primary focus if we are going to address the financial plight of many, if not most of our municipalities and metros.

The distinction between successful and failing municipalities lies not in geography or population size but in leadership and governance. A review of Auditor-General reports reveals that municipalities that apply sound governance policies and principles consistently outperform those riddled with financial mismanagement.

A history of decline


During the first half of our three decades of democracy, widespread municipal failure was not commonplace in South Africa. Most municipalities were financially stable, maintained their infrastructure, and settled debts owed to Eskom and water boards.

However, the Zuma administration marked a turning point. Merit-based municipal administration appointments were abandoned and cadre deployment kicked into overdrive, leading to the growing degradation of municipal service delivery. This trend affects not only rural municipalities but also large metros.

Read more: Government’s funding model for municipalities needs a complete overhaul

In the book Why Nations Fail by Darren Acemoglu and James A Robinson, common factors of failed nations are the extractive mindset of their institutions, along with political power concentrated in the hands of self-serving elites. Municipal dysfunction reflects similar issues highlighted therein.

True economic progress requires innovation, inclusivity and systemic change – concepts that our current government leadership has been unwilling to embrace until the advent of our seventh administration about six months ago. This resistance over the past 15 or so years has permeated municipal leadership, perpetuating a culture of mismanagement and inefficiency.

Municipal revenues have increased above inflation


Contrary to popular belief, municipalities are not underfunded. In 2010, collective municipal revenue was about R154-billion. By 2024 this figure had ballooned to R517-billion, representing an average annual increase of 9%.

This revenue growth has outpaced inflation, which averaged 5.2% annually, and even exceeds the addition of the average annual population growth of 1.6% for the same period. 

Adjusting for inflation and adding an additional percent to cater for developmental needs, plus factoring in population increases for per-capita basis, collective municipal revenues would have reached about R442-billion per annum by 2024 – yet they are about 17% higher at R517-billion.

This excessive extraction of rates and taxes by our municipalities may have been acceptable if residents and businesses had experienced good service delivery, infrastructure development and excellent maintenance programmes.

Read more: Two reforms that will help address deteriorating municipal water services

Instead, residents across most of our municipalities and metros face water supply interruptions, excessive unpaid water losses, mounting potholes, electricity outages and raw sewage flowing through public spaces and into our rivers. Neglecting infrastructure maintenance now only increases the cost of future repairs, thereby compounding the crisis.

Success through sound management


Not all municipalities are failing. Some have demonstrated strong financial management and disciplined spending. These municipalities consistently receive unqualified audits from the Auditor-General, whose reports credit the success of these municipalities to stable leadership and robust governance, along with transparent financial practices, ethical leadership and a culture of accountability.

In contrast, poorly performing municipalities suffer from management instability, weak oversight and financial mismanagement. Cadre deployment exacerbates the problem, as political meddling in the appointment of officials often gives rise to a lack of skills or independence to perform effectively.

Consequently, holding poor performers and wasteful contractors to account has become a serious challenge. The knee-jerk reaction has been to throw more people at the problems, thereby increasing the portion of municipal budgets consumed by salaries and consultant fees, leaving less available for essential services or infrastructure projects and maintenance.

Addressing the real issues


The unsustainable burden of incessant increases in rates and taxes above CPI on South Africans and businesses underscores the urgency of reform. Again, I emphasise that the focus should not be on finding new revenue streams but on addressing the core issues of leadership and financial discipline. This involves:

  • Enhancing oversight and accountability: Strengthen municipal public accounts committees to ensure rigorous oversight powers on procurement processes, expenditures and compliance with financial regulations;

  • Prioritising maintenance: Allocate sufficient resources to infrastructure upkeep, thereby preventing costly future repairs. Eliminate overpriced tenders and ensure contractors are competent and financially sound to complete the jobs at the highest quality levels allocated to them;

  • Controlling personnel and other costs: Rationalise staffing levels and salaries to align with financial capacity and service delivery needs. Conduct zero-based budgeting to eliminate unnecessary expenditures and bloated contracts; and

  • Strengthening leadership: Foster political stability and meritocratic leadership to create a culture of accountability and performance in municipal administrations.


The path forward


South African municipalities do not lack funding; they lack financial discipline and effective management. By addressing these internal challenges municipalities can improve service delivery, rebuild public trust and achieve financial sustainability without burdening residents with additional charges.

With municipal elections looming in 2026, South Africans have an opportunity to seriously consider the future of their towns and cities.

Read more: SA’s recovery depends on municipalities getting solid support from government

Municipalities can be fixed and while some will take longer to do so than others, it all comes down to political will, something the electorate have a direct impact on. While the national government may lack this resolve, local governments can be encouraged to lead the way.

As the saying goes, “you can’t leave those who created the problem in charge of the solution”.

Meaningful political change at the municipal level is long overdue. Active citizens must demand better governance and participate in shaping the future they wish to see.

The time for action is now. South Africa’s municipalities – and the residents who depend on them – deserve nothing less. DM

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