Curb political interference in municipal management and give the national government clearer powers to intervene in failing municipalities to ensure they can deliver services and support economic revival.
These are among the recommendations of a new Bureau for Economic Research (BER) report, which argues that failure to improve municipal outcomes will mute the effect of the government’s broader structural reforms to boost economic growth.
It urges local government to hire more engineers and finance professionals, and for municipal trading services in electricity and water and sanitation to be set up as viable, stand-alone entities to address underinvestment and poor management of the services.
The report, from the BER’s new Impumelelo growth lab, comes as the Operation Vulindlela (OV) reform unit gears up for phase 2 of its work. President Cyril Ramaphosa is expected to announce details in his state of the nation address early next month.
The five-year-old unit — focused on areas including electricity, transport, visas, digital spectrum and water — clocked up significant gains. It still has much to do to address crises in areas such as logistics, but has proposed adding three priorities to its list for phase 2. One is reform to reverse municipal decline.
The BER report highlights the inadequate funding structures, technical skills shortages, underutilisation of grants and falling capital spending undermining municipalities’ ability to deliver basic services and infrastructure.
“Many suffer from a severe shortage of capacity and engineering skills, governance issues, political interference and financial stress, which have profound social and economic consequences,” it says.
The jump in the number of “hung” councils to 70 since the 2021 municipal elections meant many municipalities, including large metros such as Joburg and Tshwane, are run by often unstable coalitions, making it even more important to insulate municipal administrations from the political process, says the report, which proposes reforms to clarify roles and strengthen oversight and accountability.
After “years of cadre deployment and political appointments interrupted the pipeline of skilled personnel”, it calls for a strong focus on merit-based appointments for new staff, better performance outcomes measurement, practical training, a system that sanctions public servants who “fail to perform their duties and appointing more engineers overall”.
Bad debt
Infrastructure spending by SA’s 257 municipalities is hardly more than a tenth of their total spending, with municipal capital spend in 2022 lower in real terms than a decade before, according to the report. Of particular concern was an especially striking drop in infrastructure spending in metros, which should be engines of economic growth. Almost half of local municipalities lost money selling electricity in 2023, up from a quarter in 2019, with customer bad debt rising steeply.
The failure of the Treasury debt relief programme for the municipalities that collectively owe Eskom more than R78bn suggests that the underlying causes of municipalities’ debt traps are not being addressed, says the report. It takes issue with reform of local government that the government has already initiated, particularly relating to its powers to intervene in municipalities.
Two acts are planned. “Having two acts for interventions ... will add to the existing complexity,” says the report, which recommends one far simpler act, preferably an improved Municipal Financial Management Act.
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