The Future of South Africa’s Economy Lies in Municipal Decisions

Last week, we were delighted to welcome Minister of Cooperative Governance and Traditional Affairs (Cogta), Velenkosini Hlabisa, to speak to our council regarding advancements in local government reform. The minister was refreshingly straightforward—local government reform is essential for economic reform.

Dysfunctional municipalities present a significant barrier to investment and job creation, while effective ones act as engines of growth. The challenges facing municipal service delivery are at the core of South Africa’s economic trajectory.

He was forthright about the root causes of failure, explicitly identifying cadre deployment as a major issue, affecting both administrative and political leadership levels.

He noted that many mayors are deployed without the necessary skills to comprehend financial statements, audit outcomes, or long-term planning documents. Additionally, he recognized that corruption is deeply rooted in the municipal sector, and consequence management has been largely nonexistent.

Read: Cronyism in key municipalities hampers big business – BLSA

Business has a clear, vested interest in municipal performance. Well-functioning councils are crucial for businesses to operate effectively, ensuring employees enjoy environments conducive to family life. From local roads to water supply, service delivery impacts the cost of doing business significantly.

The minister is currently crafting a white paper on local government, positioning it as his crucial reform tool. This paper will be submitted to cabinet next month, with implementation potentially starting in July.

It aims to enhance the separation between political leadership and administration, further professionalizing the civil service, and establishing a corruption register to prevent dismissed employees from rejoining the state. In cases where municipalities are severely dysfunctional, unable to pay salaries or deliver services, the white paper suggests a mechanism for amalgamating them with better-resourced neighboring councils.

These reforms are vital, which is one reason we created the BLSA Reform Tracker. Minister Hlabisa’s reform agenda aligns closely with the progress we monitor. Additionally, we recently launched the latest Tracker quarterly report, available for download here.

Read: Election pressures expose collapse in municipal governance

Overall, the Tracker indicates that central government reforms are making headway, albeit not as swiftly as we would prefer—generally, they are trending in a positive direction. However, municipal reforms have lagged behind. The Tracker has been monitoring reforms since local government was included in the Operation Vulindlela agenda in mid-2025.

It highlights advancements in separating water and electricity services within municipalities, yet other areas, such as enhancing professionalization and combating corruption, have remained stagnant.

The White Paper would represent a significant advancement, and I look forward to seeing the Tracker reflect this progress soon.

While most reforms are moving in the right direction, an important exception this quarter has been the overall logistics reform program. The Tracker indicated a regression in the index tracking these reforms.

This setback is attributed to various factors, including missed deadlines for Volume 4 of the Network Statement, delays in the National Rail Bill, and notably, emerging obstacles to private sector participation in the logistics system.

Read: South Africa’s reform efforts stall as rail and ports lag

Transnet continues to dictate all terms for participation and oversees all projects, resulting in agreements that disproportionately benefit the parastatal over private partners. The network access agreements, which should facilitate the operation of 11 private sector operators on the Transnet network, are struggling to reach completion with terms that severely limit the success of private operators.

Just three months ago, logistics reform appeared promising; now, caution flags are raised. We require a competitive, efficient, and innovative logistics system for our economy to foster growth. These reforms are non-negotiable—they must be expedited. Institutional resistance and hurdles need to be decisively addressed. Transnet should not be allowed to create terms that compromise the entire reform objective.

Read: Are South Africa’s transport reforms repeating Telkom’s mistakes?

The Tracker did show improvements in the electricity sector, following last quarter’s revelation that the proposed structure for unbundling the network operator from Eskom conflicted with established policy.

Eskom and the ministry had put forth an unbundling structure that deviated from the policy goal of creating an efficient, neutral hub for a competitive electricity market. Such institutional deviation could have jeopardized the entire electricity market transformation.

However, the president firmly redirected the reforms, reaffirming the policy during the state of the nation address in February. The Tracker now reflects an improved trajectory as a result. Nonetheless, the need for such intervention underscores the fragility of reform progress when institutions stray from agreed policies.

This kind of political leadership is vital to maintaining momentum in reforms, highlighting the synergy possible when business and government collaborate. I am excited to work with Minister Hlabisa as he implements his ambitious reform agenda. In this and many other areas, the successful implementation of reforms will drive the growth and job creation our country urgently needs.

One of the most notable instances of institutional reform post-State Capture is the South African Revenue Service (Sars). I had the pleasure of attending the farewell event for outgoing commissioner Edward Kieswetter last week as he concluded his six-year tenure.

During this time, Sars transformed from a devastated institution, stripped of capacity and manipulated into a protection racket for state capture, to a competent and fair tax collection agency.

The fact that the agency exceeded its collection target in his final year speaks volumes about his accomplishments. Sars has once again become an institution that criminals fear and ensures that everyone pays their fair share. Its collection efforts have been pivotal in stabilizing government finances, which is crucial for fostering a conducive business environment.

Read: Kieswetter exits on a high note

As I remarked at his farewell, “You did not merely manage Sars—you restored, rebuilt, and redefined what exemplary leadership in public service entails.”

“You leave Sars as a benchmark for what is achievable in this country, and thanks to you, South Africa now has evidence that institutions can be revitalized through principled, value-oriented leadership.”

I wish him the very best in the next chapter. His successor, Dr. Ngobani Johnstone Mkhubu, is a commendable choice. I am enthusiastic about collaborating with him to ensure the agency continues to fulfill its mandate effectively.

Read: Ramaphosa appoints Ngobani Johnstone Mkhubu as Sars head

Last week, BLSA elected a new board. I would like to extend my gratitude to the previous board for their consistent support and contributions to the organization’s executive. In particular, I want to thank retiring members, including outgoing chairman Nonkululeko Nyembezi, Dr. Leila Fourie, Neal Froneman, Shirley Mashaba, and Lungisa Fuzile. Their immense contributions and unwavering commitment to driving reform have been invaluable.

I welcome new chairman Adrian Gore and new board members, including Daniel Mminele, Kenny Fihla, Valdene Reddy, and Phuti Mahanyele-Dabengwa. They join reappointed members Shameel Joosub, Nolitha Fakude, Prof. Michael Katz, Vivien McMenamin, Bonga Mokoena, and Adrian Enthoven.

Adrian brings extensive business experience and a long-standing dedication to leveraging business as a catalyst for economic transformation. Under his leadership, I am confident that BLSA will continue to drive the urgent reform agenda that South Africa needs. I look forward to collaborating with the new board to achieve BLSA’s objectives.

Busi Mavuso is the CEO of Business Leadership South Africa