Finance minister Enoch Godongwana says a new approach to developing local government capacity has been developed as past practices have proved ineffective.
Local government is plagued by mismanagement, poor financial controls and corruption which severely affect service delivery.
The minister clarified his views on the issue of local government capacity building in replies to questions in parliament by ANC MP Molapi Lekganyane and EFF MP Omphile Maotwe.
Godongwana said the National Treasury published a review of the system of capacity building for local government in 2022 which revealed that the system had reached a crisis point in its ineffectiveness. In 2019, about R9bn was spent by about 40 entities or programmes across all spheres of government, yet the impact was limited.
The review noted that structural issues hindered municipal performance such as fragmented planning and implementation, shortages of skilled personnel, weak accountability, ineffective leadership, governance failures, political interference, a focus on short-term fixes rather than sustainable solutions, and inadequate problem diagnosis.
“The distinction between capacity and capability was a key outcome of the review and indicated the need to shift from traditional capacity-building approaches to a broader focus on capability development.
“While capacity-building typically emphasises individual skills development, capability development considers the wider institutional environment, including governance structures, systems, and processes that enable municipalities to function effectively. This shift led to the development of a capability development programme and the formulation of a cohesive Treasury capability development strategy to strengthen local government performance,” Godongwana said.
“The money for capacity-building programmes is primarily spent on training, workshops, skills development and expert deployment to address capacity gaps in municipalities. It also funds initiatives aimed at improving governance, financial management, infrastructure planning and service delivery.
“However, much of the expenditure focuses on individual capacity building rather than organisational capability, with limited evidence of measurable impact on municipal performance. Additionally, some funds are allocated to monitoring, public participation and community engagement activities, though these are often fragmented and inconsistently reported,” Godongwana said.
For the 2025/26 financial year, the government has allocated R762m for capacity-building conditional grants aimed at improving municipal governance and service delivery. These include the infrastructure skills development grant and the local government financial management grant. Another R2.2bn has been allocated through various infrastructure grants to further support capacity-building efforts within municipalities.
The minister said the Treasury was redesigning its financial management support initiatives to provide a structured framework that equipped municipalities with the necessary skills, resources and abilities. This approach would streamline existing initiatives for greater effectiveness and sustainability.
“Aligned with the capability development framework, the programme adopts a whole-of-municipality approach, recognising that what may appear to be financial problems often stem from deeper governance issues. This requires a co-ordinated, problem-led approach where municipalities are active participants in identifying challenges and co-creating solutions.”
While financial management remained a core focus, the programme would also support broader efforts to strengthen governance and service delivery.
The new approach would involve conducting capacity assessments of municipalities before awarding grants or financial management support to identify gaps and ensure the most effective use of grant funds. Multiyear grants would be used to build sustainable in-house municipal capabilities, rather than relying on stand-alone training interventions and a municipal scorecard would be used to track progress and link funding to performance.
“These reforms represent a fundamental shift in how municipal capacity-building is approached,” Godongwana said.
“Rather than merely increasing financial allocations, the focus is on ensuring that funds are used more effectively to develop long-term, sustainable municipal capabilities. Over time, this will strengthen municipalities’ ability to fulfil their constitutional obligations, improve service delivery, and promote good governance.”
As part of the process of reforming its approach to providing financial management support to municipalities, the Treasury was merging a number of programmes into an integrated local government financial management capability programme to enhance financial management capabilities in a more structured and effective manner.
Over the past five years R380m had been provided by international development partners to implement the capability development strategy.
The Treasury is also involved in developing the capacity of national and provincial government officials.
Godongwana noted that the review of the 1998 local government white paper would include a review of its revenue assumptions and their impact, if any, on the determination of the equitable share and allocation of nationally raised revenue.
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