Municipal meltdown: Hlabisa blames debt crisis on failing revenue collection
Cooperative Governance and Traditional Affairs (Cogta) Minister Velenkosini Hlabisa many municipalities in South Africa are in severe financial distress largely due to ineffective revenue collection systems.
Image: Department of Cooperative Governance and Traditional Affairs / Facebook
Municipalities are drowning in debt largely because they cannot collect the money they are owed, according to Cooperative Governance and Traditional Affairs Minister Velenkosini Hlabisa.
Hlabisa made the remarks Monday at a national dialogue in Midrand, north of Johannesburg, under the theme "Every Municipality Must Work – A Call to Collective Action."
More than 300 representatives from political parties and municipal councils gathered to reflect on the relevance of the 1998 White Paper in the context of local government performance.
Hlabisa emphasised that the gathering was intended to facilitate open dialogue rather than deliver firm decisions.
'As we embark on this critical process, we recognise the crucial role political parties play in shaping the future of our local government system,' Hlabisa said.
'Local government is where policies become services, promises become infrastructure, and governance becomes tangible.'
He said that while some municipalities are performing well, most are underperforming, plagued by financial mismanagement, poor governance, and over-reliance on consultants.
'All 257 municipalities in South Africa are governed by political parties, either through majority or coalition governments,' he said.
'We therefore recognise the central role of political parties and value your input as we seek to improve the White Paper on Local Government.'
Many municipalities in the country are facing tough times, with many re-dealing with financial pressure, outdated infrastructure, poor service delivery, and leadership challenges.
These problems often come as a result of weak financial management, corruption, a shortage of skilled staff, and too much political interference.
Hlabisa said the failure of municipalities to generate sustainable revenue, particularly in under-resourced or geographically disadvantaged areas, has left many unable to meet basic obligations like paying salaries or contributing to pension and medical aid schemes.
'A one-size-fits-all approach will not solve these issues,' he said.
'We need a differentiated strategy and must consider running municipalities like businesses - with appropriate funding, structures, and remuneration for councillors.'
Meanwhile, Auditor-General Tsakani Maluleke has voiced support for the ongoing review of the 1998 White Paper on Local Government.
'I just want to put on the table that our reflection as an auditor office is that the 1998 White Paper was fantastic.
'It's good to review it…but that must be followed by a very bold and courageous assessment and recommitment to implementing it. And implementing it as I see it, it's going to take political parties genuinely thinking about who were deployed to take on the rule and responsibilities in the municipal space.'
IOL News previously reported that Maluleke's 2023 and 2024 local government audit report, tabled in Parliament last week, echoed Hlabisa's concerns.
Only 41 municipalities received clean audits. While 59 municipalities improved since the 2020 and 2021 financial years, 40 regressed.
Maluleke said that 99 municipalities received unqualified audit opinions, meaning their financial statements were credible.
However, many had significant compliance and performance reporting issues. Of these, 71 failed to submit quality financial statements and relied on auditors to correct errors.
In total, 219 municipalities spent R1.47 billion on consultants for financial reporting, yet 130 still submitted flawed financials - which highlighted the ineffective spending.
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The over-reliance on property rates and service charges has also exposed deep inequalities, with wealthier urban municipalities faring better than rural municipalities that remain trapped in a cycle of underfunding and As such, the anticipated 90% self-funding benchmark is a structural revenue shortfall that remains elusive in many municipalities with cascading effects on service delivery, infrastructure maintenance, and overall governance. The inability to generate adequate revenue has direct consequences for service delivery. Countrywide, people face persistent water shortages, unreliable electricity supply, deteriorating roads, and poor waste management. Problems with governance It is no secret that many municipalities suffer from chronic governance problems, such as the lack of accountability, political instability and infighting, cadre deployment, poor consequence management, and skills shortages. Back in 1998, the White Paper envisaged professional, accountable local administrations; instead, many councils today are beset by instability, political interference and a lack of technical expertise. This undermines both strategic planning and day-to-day operations. The funding model has inadvertently entrenched spatial and economic inequalities. Affluent municipalities with a stronger revenue base can deliver better services and maintain their infrastructure, while poorer municipalities continue to lag further behind. This perpetuates the legacy of apartheid-era spatial planning and undermines the goals of equitable development and developmental local government. For the average person, the failures of local government are not abstract policy issues; they are realities that shape daily lives. In short, the effectiveness of local government is a 'litmus test' for the health of the country's democracy. 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A re-imagined national policy on developmental local government must take seriously the funding model that is supposed to bring it to life. A differentiated approach is needed, one that recognises the local government history, the diverse capacities and contexts of municipalities. This may require increased and better-targeted national transfers, especially for poorer municipalities, alongside innovative approaches to local revenue generation. Such approaches may typically include a review of the Intergovernmental Fiscal Relations Framework to pursue a truly equitable sharing and allocation of revenue raised nationally. Reforming local government through a revised White Paper must also be part of a broader strategy to address spatial and economic structural inequalities. This must include targeted investment in infrastructure, support for local economic development and measures to expand the municipal rate base over time. But improving municipal governance will require both political will and systemic reforms that seek to professionalise local government and strengthen oversight mechanisms to root out corruption. Appointing skilled, qualified officials — rather than prioritising comradeship or political loyalty — must become the norm. This will go a long way toward strengthening local governance and accountability. As we look to the future, we must learn from the past, confront uncomfortable truths, and forge a new consensus on municipalities' role, funding, and functioning. This will go a long way in ensuring that all municipalities are 'fit for purpose' and capable of addressing the ever-evolving needs for all effectively. Dr Lungelwa Kaywood is a local government specialist and postdoctoral fellow in the Chair in Urban Law and Sustainability Governance at the Faculty of Law at Stellenbosch University.
