- Minister of Co-operative Governance and Traditional Affairs Velenkosini Hlabisa has set out to overhaul the local government system of the past 30 years.
- The “one-size-fits-all” model must be changed and some municipalities scrapped.
- Smaller municipalities should get more national funding.
- For more financial news, go to the News24 Business front page.
Minister of Co-operative Governance and Traditional Affairs Velenkosini Hlabisa plans the biggest shakeup of local government in 30 years.
These include:
- reducing the number of municipalities
- changes to the financial model
- tighter conditions around infrastructure grants
- increased powers and mechanisms for national and provincial interventions in municipalities
- incentives for skilled technical employees to work in rural areas, and
- An increase in the pay and the minimum qualifications of councillors
Hlabisa, who is also the leader of the IFP, has come into the Department of Co-operative Governance and Traditional Affairs (Cogta) like a breath of fresh air, keen to tackle the intractable problems.
He is a welcome disruptor of a system that is crippling the country. However, he may find that some of his proposals run into political and legal obstacles.
The policy changes will be contained in a new White Paper on local government, published in March 2026. Hlabisa has also tabled new legislation - the Intergovernmental Monitoring, Support, and Interventions Bill - which will the national and provincial executive, more tools to intervene in failing municipalities.
To kick off the White Paper, in May, Hlabisa published a discussion document calling for submissions by the end of July. These will be considered in the drafting, and Hlabisa is cautious about being too prescriptive now. But, of course, he does have ideas.
The biggest shake-up the White Paper will bring is reducing the number of municipalities and introducing a differentiated funding model. Of the country’s 257 municipalities, at least 35 are dysfunctional, largely (but not exclusively) because they lack a revenue base to fund the services they should provide. In theory, municipalities should raise 90% of their revenue themselves. This does not make sense, says Hlabisa.
“The one-size-fits-all funding model does not work. There has to be a change and a differentiated model. In the big cities, councils have sufficient people to collect from. For the smaller ones, people must make proposals. What is the best percentage split?” he says. This also implies reconfiguring the number of municipalities.
Hot potato
“There is no purpose in keeping a non-viable municipality, so the number must go down. The number of municipalities must be determined by whether they are viable, fit for purpose, and have a revenue base. We can’t just combine one or two non-viable municipalities and hope that the new entity is viable,” he says.
Political parties – especially the ANC, but also the IFP and others – have vested interests in councils, which are used to dispense jobs, patronage, and control procurement. This will be a very hot potato.
Hlabisa also wants to change the law to restrict grant payments to municipalities that constantly squander funds or fail to spend them on capital projects.
Under the Division of Revenue Act, conditional grants are transferred to municipalities under various schedules. One of these schedules – Schedule 6B – allows for “allocations-in-kind”. Hlabisa says that if conditional grant funds are allocated under this category, then the national government can effectively manage and control those funds on behalf of the municipality.
This is done through the Municipal Infrastructure Service Agent (MISA), which was set up in 2012 to support municipal infrastructure projects. MISA has had limited success, mainly because while it can assist municipalities in implementing projects, it does not have the power to control the cash flow, unless allocated under 6B.
He says what typically happens then is that the municipality “runs out of money” to complete the project, which then stalls. For funds to be allocated under 6B, a municipality must first agree because the money constitutionally belongs to it. Two examples – an Emfuleni sewerage project and a project in the uThukela region to which funds were transferred under 6B by Hlabisa’s predecessor, Thembi Nkadimeng – have been successfully completed on time and on budget. This year, substantially more has been allocated via 6B.
“If MISA becomes the implementing agent, then it can control the funds. But if the municipality does not agree, we can’t touch it. We want to change the law so that it works the other way round. If a municipality has failed to spend for five years, then it is clear that it does not have the capacity,” he says. Any municipality that does not want to be overridden must spend their grants on time.
“It ends there,” he says.
If this passes the constitutionality test, it will solve the problem that the Treasury and Cogta have grappled with for years: cutting off a municipality’s funds for capital projects harms communities, often where development is most needed, and not the government officials who squandered the money.
The Treasury says that to make it compulsory for Misa to be used, amendments would be needed to the Municipal Systems Act, the Municipal Finance Management Act (MFMA), and possibly the Constitution.
Hlabisa also believes he has a solution for another intractable problem: how to remove the hundreds of municipal officials who are not qualified to do the jobs they have been appointed to.
At the top levels, he thinks this is less of a problem. Skills and qualifications requirements now apply to municipal managers and the top executive team. The MEC scrutinises new appointments to give permission, and if municipalities want to deviate from the requirements, they must obtain a waiver. Councils that ignore the qualifications and do not get a waiver are taken to court.
Proof that this works, he says, is that numerous cases are underway. He says it is not necessarily the case that an ANC MEC will protect an ANC council. He, in turn, has scrutiny over the MECs. A whistleblower could write directly to him, he says, if unqualified executives are appointed.
Retaining skills
Removing people at the middle-management level, where hundreds of inappropriate appointments sit, is trickier.
“If you find a person who is a director of technical services and that person does not have an engineering qualification, some people say, fire him. But it will take you a long time to dismiss that person, because there are labour relations issues. Rather, redeploy that person and advertise the position,“ he suggests.
As many councils will attest, this is easier said than done. Would the redeployed have their salaries downgraded to suit their new positions, and would they agree? If not, councils would have to employ lower-skilled people at inflated salaries. To attract properly skilled people, such as engineers, Hlabisa wants the White Paper to address the question of financial incentives for skilled personnel in rural areas.
A third potentially costly reform is Hlabisa’s suggestion that councillors be paid far better and that their roles be considered full-time. This should be accompanied by professional and competency standards for politicians. He does not believe this would lead to even more violence and corruption as people contest to be candidates for council because this has not happened in the contest to become MPs.
”MPs earn big salaries, but there is no violence over who becomes an MP. Once you define the remuneration of councillors well, you will professionalise the work of being a councillor. If every councillor is full-time, you will have efficiency,“ he believes.
Increasing the wage bill at the local government level might not go down well with the Treasury, which is in a decade-long battle to rein in wage costs at the municipal level.
The policy fixes are long-term, and reconfiguring the number of municipalities could take years. In the immediate term – the 16 months or so until elections – Hlabisa is tackling the basics, beginning with financial management and augmenting capacity at the most distressed municipalities.
Through an arrangement with Finance Minister Enoch Godongwana, with whom he has a memorandum of understanding, councils that cannot account for their finances or fail to enforce consequences for financial mismanagement will have their equitable share funding withheld. Godongwana has this power under the MFMA, but it has seldom, if ever, been used.
The first warnings have gone out to five metros: Joburg, Ekhuruleni, Nelson Mandela Bay, Tshwane, and Mangaung.
In the eight municipalities that typically do not file their annual financial statements, and the 35 that consistently get an audit disclaimer, Cogta is moving in to help do the job. Starting in January, Cogta teams will be in municipalities to help councils address audit findings from the previous year.
Reinforcement and Support Teams have already been introduced into Buffalo City (East London) and Makana (Grahamstown), and others will follow as their needs are analysed and understood. Hlabisa aims that “the last set of financial statements as councils end their term will be a positive audit outcome. The new council can then begin with a slate of good accountability”.
Hlabisa has attacked local government dysfunction with energy and ambition. He might not get all he wants in next year’s White Paper, but he is making a very good start.
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