With South Africans set to elect new municipal councils on 4 November, political parties are sharpening their campaigns around service delivery and local governance. For investors, however, the more pressing question is what functioning municipalities mean for economic growth.
For Busisiwe Mavuso (pictured), chief executive of Business Leadership South Africa (BLSA), municipalities have become far more than service delivery institutions. They shape whether businesses invest, whether jobs are created, and whether South Africa can deliver sustained economic growth.
During a recent PSG Think Big webinar, Mavuso argued that deteriorating municipal performance has become a material investment risk, not because investors follow local politics, but because municipalities determine whether businesses can operate in a stable, predictable environment.
“Capital is not sentimental,” she said. “Investors allocate capital based on risk. They allocate capital based on stability, predictability, and returns.”
That assessment extends far beyond the municipality itself. Weak local governance raises operating costs for businesses, weakens South Africa’s attractiveness to multinational investors, and threatens to undermine the gains achieved through broader structural reforms.
The hidden cost of municipal failure
Municipal dysfunction carries costs that rarely appear in municipal budgets.
As basic services become less reliable, businesses are increasingly funding infrastructure that municipalities should be providing. Backup generators, water storage, private security, road repairs, and infrastructure maintenance have become part of the cost of doing business in many parts of the country.
Sometimes the involvement goes further. Mavuso pointed to Volkswagen South Africa’s decision to assume responsibility for maintaining four municipal electricity substations serving its operations in Nelson Mandela Bay.
The cumulative cost influences investment decisions.
“A lot of businesses quietly choose to disinvest, without making too much noise,” she said.
For multinational companies, those decisions are often made far from South Africa.
Why Johannesburg matters nationally
Although municipal challenges are widespread, Mavuso singled out Johannesburg because of its importance to the national economy.
The city generates about 16% of South Africa’s gross domestic product and is home to roughly 70% of the country’s corporate head offices.
“Joburg’s decline has reached a point where silence would be irresponsible from a business perspective. The situation has become urgent.”
She rejected the notion that the city’s deterioration should simply be accepted.
“We refuse to accept that Joburg’s decline is inevitable. We refuse to accept that the failure of the city of Joburg should be normalised.”
When South Africa’s commercial capital struggles to provide reliable electricity, water, roads and basic governance, the country’s investment proposition weakens.
The next phase of reform
South Africa has made measurable progress in several areas that were previously constraining economic growth.
Operational improvements at Eskom and Transnet, greater fiscal discipline, and stronger sovereign credit outlooks have helped to restore confidence. Mavuso believes local government is the next critical stage of that reform agenda.
She said Operation Vulindlela’s increased focus on municipalities reflects the fact that South Africa’s next major growth constraint is no longer electricity alone, but the quality of local government.
Among the most significant proposals are measures to ring-fence municipal utility revenues, professionalise local government administration, and enable earlier intervention when municipalities begin to fail.
Referring to figures previously highlighted by National Treasury, Mavuso noted that the City of Johannesburg collected R11.9 billion in water revenue, while only R1.3bn was spent on water-related purposes.
“It’s not like we don’t have the money to fix these problems,” she said. “We have the money, but we are not spending the money right.”
Business wants a seat at the table
Business has already demonstrated what public-private collaboration can achieve, Mavuso said.
She pointed to the partnership between business and the government that supported reforms in energy and logistics, contributing to improved operational performance at Eskom and Transnet. BLSA, she said, wants to apply that same model to municipalities.
The organisation has also committed R20 million to support Operation Vulindlela’s municipal reform programme, but Mavuso emphasised that business cannot solve the problem on its own.
“We’ve raised our hands and said we are willing to take the same business-government partnership… to the City of Joburg,” she said.
That willingness comes with one condition.
“We need a counterparty in the City of Joburg that is serious about turning the city around. Otherwise, it’s really going to be an absolute waste of our time.”
Coalition politics is here to stay
The municipal elections are also likely to reinforce a political reality that has shaped South Africa since the 2024 national elections and the formation of the Government of National Unity (GNU): coalition government is becoming the norm rather than the exception.
Mavuso does not see coalition government as inherently unstable. She believes coalition government is likely to remain a feature of South African politics for years to come.
“I don’t see South Africa having an outright majority political party anywhere in the near future,” she said.
The challenge, she argued, is not coalition government itself, but whether coalitions are built around service delivery rather than political expediency.
“Once we have the coalition of the right political parties, it can actually work.“This is where we really have to start understanding as South Africans that the economics and politics are two sides of the same coin.”
Capability matters as much as policy
While municipal reform often focuses on governance frameworks and legislation, Mavuso believes capability is the more fundamental challenge.
She supports proposals to professionalise municipal administrations, saying implementation failures often stem from a lack of skills rather than strategy.
“It is a function of incompetence,” she said. “It is a function of having CFOs, for instance, who don’t know the difference between income and cash.”
She also argued that National Treasury should be empowered to intervene earlier when municipalities show clear signs of failure, rather than waiting until financial crises become irreversible.
Reform is an ongoing process
Beyond municipalities, Mavuso argued that South Africa cannot afford to lose momentum on structural reform.
She cautioned that recent progress in areas such as electricity, logistics, and fiscal credibility should not be taken for granted.
“These reforms are not events; they are a process,” she said.
Unless implementation continues, she warned, the improvements South Africa has begun to see could be reversed.
Without a more predictable operating environment, she argued, South Africa will struggle to attract the capital needed to expand the economy and create jobs.
“Our economy has not been growing at more than 1% for the past 15 years, and yet our population growth has been growing at about 1.7%,” she said. “The only way we get that right is through reforms.”
Accountability attracts investment
Business, Mavuso said, remains committed to partnering with government to improve municipalities, just as it has supported reforms in energy and logistics.
“Calling government out on these issues is not confrontation,” she said. “It is merely calling for accountability.”
For Mavuso, accountability is not simply a governance principle. It is a prerequisite for investment.
Municipal performance influences far more than local service delivery, Mavuso said. It shapes the confidence of businesses already operating in the country, the willingness of international investors to commit fresh capital and, ultimately, South Africa’s prospects for sustained economic growth.
“We need them to commit to measurable reforms,” she said. “Business is going to be constructive, but it’s definitely not going to be silent.”
