The Path Forward for South Africa’s Economy: The Impact of Municipal Choices

Last week, we were excited to host Minister of Cooperative Governance and Traditional Affairs (Cogta), Velenkosini Hlabisa, who addressed our council about progress in local government reform. The minister’s approach was refreshingly candid—he emphasized that reform in local government is crucial for economic development.

Dysfunctional municipalities are a significant obstacle to investment and job growth, while functional ones serve as engines of economic progress. The issues surrounding municipal service delivery are central to the economic trajectory of South Africa.

He was direct in identifying the root causes of failure, particularly highlighting cadre deployment as a major concern that impacts both administrative and political leadership.

He pointed out that many mayors are appointed without the essential skills needed to understand financial statements, audit results, or long-term planning documents. Furthermore, he acknowledged that corruption is deeply entrenched in the municipal sector, and effective consequence management has been largely absent.

Read: Cronyism in key municipalities hampers big business – BLSA

Businesses have a clear, vested interest in the performance of municipalities. Well-functioning councils are vital for effective business operations, ensuring that employees enjoy environments conducive to family life. From local road infrastructure to water supply, service delivery significantly affects the cost of doing business.

The minister is currently developing a white paper on local government, which he sees as a vital tool for reform. This document will be presented to the cabinet next month, with implementation potentially starting in July.

The aim is to improve the separation between political leadership and administration, further professionalize the civil service, and create a corruption register to prevent dismissed employees from returning to public service. In situations where municipalities are severely dysfunctional and unable to pay salaries or provide services, the white paper recommends mechanisms for merging them with better-resourced neighboring councils.

These reforms are essential, a key reason behind the creation of the BLSA Reform Tracker. Minister Hlabisa’s reform agenda closely aligns with the progress we monitor. Additionally, we recently released the latest quarterly Tracker report, available for download here.

Read: Election pressures expose collapse in municipal governance

Overall, the Tracker indicates that central government reforms are progressing, albeit not as quickly as we would like—generally, they show a positive trend. However, municipal reforms have lagged behind. The Tracker has been monitoring reforms since local government was incorporated into the Operation Vulindlela agenda in mid-2025.

It reveals progress in separating water and electricity services within municipalities, but other areas, such as improving professionalization and combating corruption, have stagnated.

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

While most reforms are advancing positively, an important exception this quarter has been the overall logistics reform program. The Tracker indicated a downturn in the index that monitors these reforms.

This regression is attributed to several factors, including missed deadlines for Volume 4 of the Network Statement, delays in the National Rail Bill, and emerging challenges to private sector involvement 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 favor the parastatal over private partners. The network access agreements, which are supposed to enable 11 private sector operators to function on the Transnet network, are struggling to finalize terms that severely limit their success.

Just three months ago, logistics reform looked promising; now, caution is warranted. We need a competitive, efficient, and innovative logistics system for our economy to thrive. These reforms are non-negotiable—they must be advanced without delay. Institutional resistance and obstacles need to be addressed decisively. Transnet should not be allowed to set terms that undermine the entire reform objective.

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

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

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

However, the president firmly redirected the reforms, reaffirming the policy during the state of the nation address in February. As a result, the Tracker now shows an improved trajectory. Nevertheless, the necessity for such intervention highlights the fragility of reform progress when institutions deviate from agreed policies.

This kind of political leadership is crucial for maintaining reform momentum, demonstrating the potential for synergy when business and government collaborate. I look forward to partnering with Minister Hlabisa as he implements his ambitious reform agenda. In this and other critical areas, successful reform implementation will drive the growth and job creation that our country urgently requires.

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

During this period, Sars evolved from a beleaguered institution deprived of capacity and manipulated into a protection racket for state capture, to a fair and competent tax collection agency.

The fact that the agency exceeded its collection target in his final year speaks volumes about his achievements. Sars has once again become an institution that criminals fear, guaranteeing that everyone fulfills their tax obligations. Its collection efforts have been instrumental in stabilizing government finances, which is essential for creating a conducive business atmosphere.

Read: Kieswetter exits on a high note

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

“You leave Sars as a benchmark for what can be achieved in this country, and thanks to your leadership, South Africa now has proof that institutions can be revitalized through principled, value-driven leadership.”

I wish him all the best in his next chapter. His successor, Dr. Ngobani Johnstone Mkhubu, is an excellent choice. I am eager to collaborate 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 express my gratitude to the previous board for their constant support and contributions to the organization’s executive. I especially want to thank retiring members, including outgoing chairman Nonkululeko Nyembezi, Dr. Leila Fourie, Neal Froneman, Shirley Mashaba, and Lungisa Fuzile. Their significant contributions and dedicated 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 commitment to utilizing business as a catalyst for economic transformation. With his leadership, I am confident that BLSA will continue advancing the urgent reform agenda that South Africa needs. I look forward to working with the new board to achieve BLSA’s objectives.

Busi Mavuso is the CEO of Business Leadership South Africa