The role of local government in South Africa's national growth strategy is often underestimated, despite being a critical enabler of businesses of all sizes. According to David Christianson, local government is an independent sphere with constitutionally protected powers and functions, not a junior tier of the governmental system. When local government performs its service delivery role effectively, it facilitates businesses to operate efficiently. However, the current state of local government in South Africa is largely dysfunctional, failing to perform even basic allocated tasks.
The National Treasury's latest section 71 report on Local Government Revenue and Expenditure reveals a system that is unable to productively spend funds. Capital spending, funded by transfers from the national fiscus, amounts to only 10% of local government expenditure, whereas a growth-generating system would require this figure to be 30%. This has significant implications for South Africa's economic growth, which has been pathetic over the past 20 years. The sphere of local government is deeply implicated in this poor performance.
Investors are deterred from localities that cannot provide reliable basic services such as water and electricity, and where infrastructure is poorly maintained. Firms cannot operate efficiently when faced with potholed roads, broken traffic lights, and unsound bridges. Furthermore, local administrators often seem more inclined to obstruct business than facilitate it. This has resulted in a lack of confidence in the local government system, which is a critical factor in driving economic growth.
The Institute of Race Relations (IRR) has published a report, Local government: crises decades in the making and how to deal with them, which highlights the need for a systemic and structural shift in the local government system. The report, supported by the Konrad Adenauer Stiftung, suggests that a fundamental reset is required to address the crises in local government. This includes re-examining the assumptions underpinning the present system and introducing new policies to rejuvenate local government.
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 the suggestions, such as revisiting the commitment to covering the entire country in two tiers of local government, appear far-reaching. The idea of "differentiated powers and functions" is also an obvious practical necessity. However, simply doubling down on the assumptions made in the 1998 white paper will amount to doubling down on failure.
The 1998 white paper was written in the early enthusiasm for South Africa's nascent democracy and sought to institutionalize the great upsurge of popular "voice" that characterized the township rebellion of the 1980s. However, the revolutionary impulse proved to be an inadequate basis for viable local institutions. The system founded on these ambitions has failed to deliver either local democracy or developmental outputs. Instead, it has resulted in a patronage system and local clientelism.
To drive economic growth, the focus needs to be on the interface between productive firms and the inputs they require. The success of firms, which drive growth and job creation, depends on a local government system that effectively administers reliable inputs. The Asian experience demonstrates that a demographic surge is directly related to growth, but this requires a functional local government system. The IRR report suggests that the needs and wellbeing of firms should be the focus of reforms to the local government system.
Key points
- Local government in South Africa is crucial for economic growth but is currently largely dysfunctional.
- A fundamental reset of the local government system is required to address the crises.
- The focus needs to be on the interface between productive firms and the inputs they require to drive economic growth.
