Mtho Xulu, president of the South African Chamber of Commerce and Industry, the biggest voice of small business in the country, says “chaos” in local government and load-shedding are the largest threats to the viability of these entities, which should be South Africa's economic backbone.
“It's creating a dire situation across the country. Drastic action from government to stop this chaos is long overdue. It's getting a lot of attention now because it's affecting the big metros, but with every local government election you've had more and more municipalities collapsing.”
He blames unworkable coalitions, municipalities being run like political fiefdoms and an ineffective department of co-operative governance & traditional affairs (Cogta) failing to ensure viable municipalities.
“Every municipal manager is appointed theoretically on their qualifications, but ultimately it's a political decision. So most people sitting in top management at municipalities are political appointees. That's a big flaw that Cogta has not dealt with.”
It has resulted in massive incompetence. The best talent is not being attracted “because of politics and because they can't pay for the best skills”.
“Only about 7% of the national budget goes to municipalities, which are the coal face of government, but the most poorly funded sphere of government."
Worsening budgetary constraints is a failure to allocate the budgets they do have appropriately because of a lack of capacity and no oversight by national government.
“They're not held accountable for driving the competitiveness of those municipalities and providing services and infrastructure that will sustain businesses and attract investment.
“We desperately need competitive, high-performing municipalities that don't just rely on handouts from national government.”
But without a proper analysis of their viability and competitiveness by Cogta, they will continue to treat the national purse “like a pot of gold until it totally runs out”, he says.
“Most have not grown their economies at all, which is why there's this migration to the metros. They have no sense of needing to be competitive to keep their businesses and attract new businesses.”
Until the interests of local businesses are put ahead of party political interests the dire situation in towns across the country will continue to deteriorate, says Xulu.
“As long as you have politicians taking all the decisions in council this won't change. If you have a council which is driven by political concerns and self-interest, then citizens and local businesses are always going to come last.”
“Business formations in every town need to be unapologetic in demanding credible and consistent services because it is those businesses, who pay rates and taxes and who bear the brunt of collapsing municipalities, which should be growing and sustaining local economies.”
— Mtho Xulu, president, South African Chamber of Commerce and Industry
He says there's “no proof” the state understands the link between quality of local government and the ability to attract businesses that grow local economies, create jobs and reduce unemployment.
“It's not enough for the president to say, like he did this week, that local government chaos is a problem. It is long coming and is going to get worse if nothing changes.”
Cogta must do its job, he says.
“They talk a lot about what needs to be done, but you have a lot of local, powerful politicians who don't always accept what Cogta says.
“We would expect the cabinet to be more decisive in holding their politicians at local government level to account.”
Cogta must ensure consequence management and citizens must hold political parties accountable for the performance of their members in council who are not taking them seriously.
“They need to ask what these coalition negotiations have to do with their interests and root out councillors who are clearly in it for themselves.”
There is an urgent need for stronger, better organised, more active civil society at local government level, he says.
“Politicians are not going to self-correct. They need to be held accountable by a very ruthless civil society.
“Business formations in every town need to be unapologetic in demanding credible and consistent services because it is those businesses, who pay rates and taxes and who bear the brunt of collapsing municipalities, which should be growing and sustaining local economies.”
They need to be more ruthless in calling out councillors who don't provide the services they need. Waiting for elections every five years is not enough because it allows ample time for corrupt, self-interested, non-performing councillors to destroy a municipality.
“We need business chambers and NPOs at local government level to consistently call them to order and keep them on their toes.”
There's a need to refine public-private partnerships at local government level so citizens and businesses have a say in the collection and deployment of their rates and taxes.
“SACCI won't necessarily call for a rates boycott, though the situation has reached that point of desperation. But if we have no confidence in the financial management of municipalities, let us put together a public-private sector model that will ensure better oversight, transparency and delivery of services.
“At the moment, businesses are paying their rates and taxes into a deep black hole and the services are not there.”
SACCI wants rates and taxes to be linked to specific projects and ring-fenced so they can only be used for those projects.
“That needs to happen within a public-private partnership framework and we need National Treasury to buy into that.”
To stop the rot that is killing local businesses it is also urgent that law-enforcement agencies act ruthlessly, without fear or favour, against councillors and officials who steal, and that municipalities be made to implement the recommendations of the auditor-general, he says.
“Every year they need to be converted into a charge sheet and we need to be shown what has been done with those culprits who have caused the collapse of these municipalities so they don't stay in the system.”
Xulu, an advocate and successful entrepreneur who started and runs an investment company, says there are 2.5-million registered SMEs in South Africa which, under normal circumstances, would be employing an average of 15 people per business.
Because of the hostile environment in which they operate, many have reduced their staff numbers to five or less.
“Because of local government chaos, we're at less than half our capacity in terms of job creation.”
If that's not enough incentive for the government to step in, then he doesn't know what it will take, he says.
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