Getting local government in South Africa on track is as much a question of its economic future as it is of governance. This is the message from the Institute of Race Relations (IRR), a Johannesburg-based think tank, whose new report, Local Government: Crises Decades in the Making and How to Deal with It, was launched at a webinar on Thursday. The webinar was held in conjunction with the University of the Free State.

Report author Terence Corrigan said that the quality of municipal government has a decisive influence on a country’s ability to attract investment, support businesses, and generate employment. In South Africa, municipal dysfunction means that this influence is largely negative.

City governance is especially important since cities represent the economic centres of modern economies. South Africa is a rapidly urbanising society, with around two-thirds of the country’s population living in urban centres and some 78% projected to be urban by 2050.

The eight South African metropolitan municipalities account for about 59% of total municipal spending. They also account for well over half of South Africa’s economic output and employment: according to figures cited in the paper, the metros produced 57% of GDP and 53% of employment in 2023.

Corrigan pointed to the stakes by noting: “Globally, cities are the engines of a modern economy; mismanaged, they can be its graveyard.”

“Municipal failure in South Africa’s major cities cannot be dismissed as a matter of local quality of life,” he continued, “The consequences extend into the national economy.”

South Africa’s local government sphere – outside a relatively small number of high performers – has been dogged by poor governance, perpetual financial difficulties, and ineffective administration. This has manifested itself in the well-known symbols of municipal decline, such as deteriorating infrastructure, unreliable water and electricity provision, potholed roads, and decrepit sewage systems. Increasingly, this is being compounded by unstable and recklessly transactional coalition governments and the penetration of organised crime into municipal systems.

For this reason, Corrigan and the IRR argue for municipal reform to be approached as part of South Africa’s broader growth agenda.

Fostering growth-oriented local government consequently demands acknowledging the complexity of the challenges confronting it and the various responses required to meet them. Corrigan said that this would include the standard and well-worn recommendations such as professionalising municipal administrations, improving financial management, and taking infrastructure maintenance seriously. These prescriptions have been regularly demanded by the Auditor General and Treasury.

However, Corrigan argued that reform of local government would also mean accepting that major elements of the design of the existing local government system need to be rethought.

The report proposes a programme to local government that accepts that different municipalities have different capacities and potentials, and that they should be accorded powers consonant with the ability to exercise them prudently.

Corrigan remarked, “We need to accept that some parts of the country just lack the economic base to underwrite municipalities as they are currently conceived. Others do not. We would emerge with an asymmetric system, based on the principle of ‘form follows function’. In some parts, there would be relatively autonomous centres collecting revenue and managing themselves. Elsewhere, what might be possible is limited to an appointed administration that provides the basics of infrastructure.”

Each of these requires political decisions and taking them may be the toughest part of a reform process. But failing to take them will have dire consequences for the country.

Above all, South Africa’s cities need to be functional, and to provide a basis for economies to operate.

“South Africa’s economic future is increasingly urban,” says Corrigan. “If its cities and towns cannot function effectively, the country will not realise the economic growth dividend that comparable societies have achieved.”