GNU looks to municipalities to grow ailing economy

The government of national unity (GNU) is set to prioritise fixing the dysfunctional local government sector, which is at the forefront of service delivery, to accelerate growth.

In delivering the opening of parliament address at the Cape Town City Hall on Thursday, President Cyril Ramaphosa said growth occurred at a local level where people live and work.

“Our municipalities must become both the providers of social services and facilitators of inclusive economic growth. They must work to attract investment,” he said.

“This approach can encourage businesses to expand and create more jobs in municipal areas. Investors are attracted to areas with reliable and modern infrastructure. Simplifying and speeding up planning and regulatory processes can make it easier for businesses to invest and operate in a municipality, thus creating more jobs.” 

The country’s 257 municipalities are grappling with fiscal and capacity challenges, with the least qualified often presiding over critical departments. This has often led to the collapse of services including the provision of refuse collection, drinkable water and sanitation, while systemic looting, corruption and fraud has become rampant. Other councils have struggled to pay staff salaries and employment benefits. 

According to the department of co-operative governance & traditional affairs website, 32 municipalities have been placed under section 139 of the constitution, and the Municipal Finance Management Act. This is the most extreme form of intervention by the department as it empowers the provincial executive to step in if a municipality cannot approve a budget, provide basic services or meet its financial commitments. 

Of the 257 municipalities, more than 120 have cases of corruption under investigation by the Hawks. In 2021, dairy company Clover said it was closing its cheese processing plant at Lichtenburg, North West, and moving it to Queensburgh, KwaZulu-Natal, due to a lack of service delivery by the Ditsobotla municipality.

Financially sustainable

The government had a constitutional responsibility to assist municipalities in the “effective exercise of their powers and functions”, the president said.

“We will ensure that the institutional structure and funding model for local government is fit-for-purpose, and that municipalities are financially and operationally sustainable. We will put in place systems to ensure that capable and qualified people are appointed to senior positions in municipalities, and ensure independent regulation and oversight of the appointment process.

“As an immediate priority, we will bring stability to governance in our metros and restore the delivery of services. We have already begun this work.” 

During a visit to the eThekwini municipality earlier in 2024, residents, city officials and business leaders told him they wanted to work together to steer the metro back to its former glory. 

“We have since put in place the eThekwini Presidential Working Group to enhance support from national and provincial government to turn the metro administration around, to fix the problems in water and sanitation and attract new investment,” he said. 

The same approach would be extended to other metros facing challenges so that “our cities can be engines of growth and dynamic centres of opportunity. In the next five years, working together, drawing on our collective capabilities, we will forge a new inclusive growth path for SA by pursuing a massive investment in infrastructure. 

Create jobs

“From our largest metros to our deepest rural areas, we have a clear intention to turn our country into a construction site, as roads, bridges, houses, schools, hospitals and clinics are built, as broadband fibre is laid and as new power lines are installed. We must work to engender a culture of maintenance of public infrastructure, and dedicate resources and establish systems to ensure this,” the president said. 

Co-operative governance & traditional affairs minister Velenkosini Hlabisa said Ramaphosa’s address was straight to the point and was the outcome of the government of national unity’s engagements during the recent cabinet lekgotla. He commended the president for asserting the need to fix dysfunctional municipalities, as that would help attract investment, create jobs and enable councils to honour their financial obligations.   

Of the department’s allocated budget of R395.7bn over the medium-term expenditure framework, 95.6% would be transferred to municipalities and affiliated entities. 

Velenkosini caused a stir after his recent remarks that dysfunctional councils would be dissolved and fresh elections held for officials. 

Wits School of Governance senior lecturer Kagiso Pooe has said if the government was serious about reform, “it needs to cut down the 257 municipalities, particularly the 44 district, 205 local municipalities and possibly one metropolitan municipality in the Eastern Cape”.

Many of these municipalities “aren’t financially viable and lack the necessary human capital to develop. So, the first step in reforming local government is to arrive at an actual sustainable number of local government municipalities and then relook at council intervention. In the absence of this, nothing will actually be achieved,” Pooe said. 

mkentanel@businesslive.co.za