DAVID CHRISTIANSON | Why economic growth needs strong local government - Business Day

David Christianson

The role of local government in a national growth strategy is often underestimated. Rather than being seen as an indispensable element of the enabling environment, local government is all too often referred to only in tandem with small business.

This equivalence does a disservice to both parties. Local government in South Africa is an independent “sphere” with constitutionally protected powers and functions. It is not intended to be a junior “tier” of the governmental system. Where it adequately performs its service delivery role, it is a critical enabler of businesses of all sizes.

This outcome is not synonymous with local economic development, as the term is so often used in South Africa. The largely failed paradigm often boils down to little more than crafters producing beadwork and wristbands, supported by activist local authorities. Instead, the focus needs to be on the interface between productive firms and the inputs they require.

It hardly needs to be reiterated that large parts of the local government system are dysfunctional, failing to perform even the most basic allocated tasks. Apart from a limited number of local authorities, mostly located in the Western Cape and administered by the DA, local systems are failing to play their part in growth.

The National Treasury’s latest section 71 report on Local Government Revenue & Expenditure (March 2026) is a description of a system that is not able to productively spend other people’s money.

Capital spending, funded by transfers from the national fiscus, amounts to only 10% of local government expenditure. In a growth-generating system this figure would be 30%.

The sphere of local government is deeply implicated in South Africa’s pathetic GDP growth performance over the past 20 years. It is simply a truism that investors spurn localities that cannot provide reliable water and electricity, where stormwater drains are blocked and sewage runs through the streets.

Firms cannot do business when faced with potholed roads, broken traffic lights and unsound bridges. Furthermore, local administrators often seem more inclined to obstruct business than facilitate it.

It is time for a fundamental reset. As the Institute of Race Relations (IRR) has commented in its new report, Local government: crises decades in the making and how to deal with them, published with the support of the Konrad Adenauer Stiftung, this requires a systemic and structural shift. As a starting point it is necessary to re-examine the assumptions underpinning the present system.

The national department of co-operative governance has circulated a new white paper intended to “rejuvenate local government” and replace its original (1998) policy document. Some of its suggestions — such as that the commitment to covering the entire country in two tiers of local government be revisited — appear far-reaching. Likewise, the idea of “differentiated powers and functions” is an obvious practical necessity.

However, simply doubling down on the assumptions made in the 1998 white paper will amount to doubling down on failure. New assumptions, aligned with current realities, need to be put in place.

The 1998 white paper was written in the full flush of early enthusiasm for South Africa’s nascent democracy. Its authors sought to institutionalise the great upsurge of popular “voice” that characterised the township rebellion of the 1980s. But the revolutionary impulse, carried by the civic movement, proved to be an inadequate basis for viable local institutions.

The 1998 white paper has two purposes in mind. First, local government was to be the arena in which democracy was most fully realised, and second, its outputs were to be developmental in impact. There is no need to be too critical of these objectives — they were of a piece with the optimism (and perhaps innocence) of the times. But the system founded on these ambitions has failed to deliver either.

Some would argue local democracy has been achieved, with regular local elections and fierce jockeying for position in coalition governments. But, while retaining the outward form of democracy, the system is one of patronage and local clientelism. Cadre deployment, which has torpedoed most local government administrations, and the associated corruption in procurement, are products of a patronage system.

This trajectory has left little room for a local electorate that chooses rationally between policy alternatives. In short, when voters become clients, they cease to be citizens.

Of course, patronage and clientelism are direct causes of developmental failures in local government. But local patronage machines are far from the only culprit. The ambition for local authorities to act as development agencies, with all the joined-up administrative and financial requirements implied, was always unrealistic. Local government in South Africa is heavily regulated, but development is never likely where an institution is overwhelmed by administrative compliance.

Part of the response to the collapse of legacy services infrastructure has been to locate new settlements ever further from urban centres. As the IRR report points out, South Africa has experienced a leap in urbanisation since the abolition of the artificial barriers imposed on human movement by grand apartheid. The country’s urban population has climbed from under half to nearly 70%.

The Asian experience demonstrates a demographic surge is directly related to growth. But sprawling entities — with the poor located far from jobs and the refugee middle classes huddled in distant enclaves — are poor drivers of economic activity. The same experience suggests the needs and wellbeing of firms (of all sizes) should be the focus of reforms.

The success of the firm — that brave and innovative economic experiment — is what drives growth and job creation. But firms in turn depend on a local government system that effectively administers reliable inputs. If we really want growth, this is the factor that needs to dominate our thinking as we reset local government in South Africa.

Christianson was commissioned by the Institute of Race Relations to write this article.

https://www.businessday.co.za/opinion/2026-09-21-david-christianson-why-economic-growth-needs-strong-local-government/