The metro trading services reform package launched by the National Treasury on Wednesday aims to ensure the country’s eight metros spend their infrastructure budgets effectively, Treasury director-general Duncan Pieterse said.
The 2026 budget projected expenditure of R1-trillion on infrastructure investment over the next three years, of which municipalities will be responsible for R205bn with big allocations to transport, water and energy.
“The question that confronts us is the following: which reforms will ensure that the R205bn spent by municipalities is spent efficiently and effectively, in the interest of service delivery and growth?” Pieterse asked, adding that the reforms aimed to restore cities’ ability to deliver reliable water, electricity, sanitation and refuse removal services.
“Over the past decade we have witnessed the steady erosion of municipal capability in many parts of the country: infrastructure failures, unreliable services, financial stress and declining public confidence.”
Pieterse noted that cities’ health is closely linked with the fate of the national economy, as most of South Africa’s population is concentrated, and most of its economic activity takes place, in them. “If our cities do not work, South Africa cannot grow.”
He said the reforms would involve more active intervention in local government to stabilise municipal governance and strengthen financial management.
“The reforms include legislative changes, stronger enforcement of funded budgets and financial recovery plans. They also include targeted investments in municipal infrastructure and smart metering and new approaches to ensure that public funds are matched to credible delivery.
If our cities do not work, South Africa cannot grow.
— Duncan Pieterse, Treasury director-general
“If capacity constraints at a specific municipality threaten infrastructure delivery, the national government will have stronger tools to reallocate funds or adjust implementation arrangements.”
Pieterse said the February budget proposed that if municipal capacity to spend becomes a problem, the funds being lost would be transferred to entities such as the Development Bank of South Africa and the Municipal Infrastructure Support Agent.
This will ensure the spending occurs, rather than the funds being reallocated to other municipalities that are able to spend, as has been the case up to now.
The metro trading services reform aims to ensure that services such as investment in electricity and water are run like integrated businesses. It creates a single unit of management accountability to deliver core trading services and will ringfence the revenues and reinvest them in those services.
Pieterse cited some instances of skewed investment. For example, the City of Johannesburg’s budget for 2025/26 estimated the city will collect R11.9bn in revenue for water but will spend only R1.3bn on water infrastructure — less than 10%.
eThekwini plans to collect R22bn in 2025/26 from electricity charges. Almost 85% of this will pay for bulk charges to Eskom, and the city plans to spend only R784m on electricity infrastructure — not even 5%.
The government will mobilise R54bn in performance-linked incentives, with R27.7bn allocated over the medium term, to restore the operational and financial sustainability of metro trading services.
To access the incentives, metros will have to meet the performance targets they have set for themselves in the performance improvement action plans they have developed for each of the trading services.
Pieterse said that as the metros’ performance improves, banks will be more willing to lend and investors to invest in their infrastructure.
“As a result, this programme is expected to unlock more than R100bn of investment in water, sanitation, electricity and waste infrastructure in the metros.
“Metro trading services reform is about rebuilding confidence in our cities, restoring capability in the state, and unlocking the economic potential that lies within our urban centres,” he added.
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