The “vicious cycle” of crumbling infrastructure and failing service delivery besetting municipalities is now under sharper focus as the second phase of Operation Vulindlela (OV) kicks off.

Operation Vulindlela is a joint initiative of the Presidency and National Treasury to accelerate the implementation of structural reforms and support economic recovery.

It was originally established in October 2020 with the first phase having zeroed in on reforms in five key areas with a high potential impact on growth and jobs:

1. Energy
2. Logistics
3. Telecommunications
4. Water
5. The visa system.

The second phase of the operation was launched by President Cyril Ramaphosa recently. The launch at the Union Buildings was preceded by a technical briefing conducted by National Treasury.

At the briefing, Presidency Director of Strategy and Delivery, Saul Musker, explained the impact that municipal under performance has on South Africa’s growth prospects. This in a country that has 257 metropolitan, district and local municipalities.

“I think it’s widely understood that the deteriorating performance of local government is a major constraint on growth, and you can solve; say the energy supply problem. But if you still have interruptions, because [of] ailing distribution networks or failures in service delivery that affects businesses, it holds back investment.

“That decline in local government performance is the result of both particular factors in each municipality, as well as structural causes that have their roots in the system. The local government system itself and the reforms that we proposed in OV2 really aim to address those structural challenges,” Musker explained. According to the OV Phase II document, the “deteriorating performance of local government has emerged as a significant constraint on investment and growth.”

Enhancing local government performance is among the three key reforms introduced by the second phase of OV (the other two being tackling the legacy of spatial inequality and accelerating digital transformation).

The document notes that an “increasing number of municipalities is affected by weak or unstable governance, poor revenue collection and funding shortfalls, and an inability to deliver basic services or process regulatory approvals.”

This as Musker added that the “heart of the problem” is a lack of investment in infrastructure and maintenance which impacts service delivery.

The document further adds that the reform of the local government system will be prioritised to prevent it from acting as a binding constraint on growth. Musker revealed a new model for revenue collection and expenditure for some municipalities that is expected to ensure service delivery and sustainability.

“The fact that our electricity and water networks, roads and so on are not being maintained, and the investment is falling behind… creates a vicious cycle. Because as the infrastructure deteriorates, revenue declines and the ability to reinvest in those assets declines as well. We’ve got to break that cycle.

“And so, the first priority that we’ve set out is to shift to [a] utility model for water and electricity services in future, also for waste management what are otherwise termed ‘trading services’ in local government, to ensure financial and operational sustainability,” Musker said.

He further explained that because these trading services are fully integrated into most municipalities, revenue collected “instead of being reinvested first in the infrastructure and the assets, is “just sucked into the pool and used for other functions” like the compensation of employees.

“How do we address that? On the one hand, institutional reforms making sure that these utilities have a single point of management accountability, that they’re actually responsible for the service, and have control of everything that they need to be able to deliver that service with professional and skilled staff.

“The second is financing reforms, separate financial accounts for the utility and a clear relationship between the utility and the municipality, which governs the division of revenue so that billing revenue is controlled by the utility, [and that] enough of that revenue is retained to invest in the assets.

“It does not mean any particular institutional form. So, it doesn’t mean that we need all metros or municipalities to form a corporate sort of business to deliver these services.

“Some may choose to do so through a municipal owned entity. Others might choose to do a concession or some sort of public-private partnership, [or] others would have a business unit within the municipality. There are many models that could be used, but they need to adhere to those principles.”

He added that this will also mean that services are provided more professionally with the addition of a “much stronger licensing and regulatory regime”.

Professionalisation

Musker highlighted that another priority is the standardisation and professionalisation of the appointment of senior officials in local government.

“That means ensuring that all municipal managers and CFOs [chief financial officers] meet minimum competency requirements and extending the mandate of the Public Service Commission [PSC] through the PSC Bill, which is already in Parliament, to local government, to be able to actually enforce that properly.”

This as on 18 March 2025, the National Assembly passed the PSC Bill which aims to regulate the Commission “and enhance its independence by, among others, establishing its secretariat to support its operations.”

At the time, Parliament said the bill will help position the commission to play a significant role in creating an efficient, innovative, and responsive public service.

“A key benefit of the Bill is that it will maintain and restore the PSC’s independence, like the institutions outlined in Chapter 9 of the Constitution while adhering to an agreed public administration mandate. The PSC will be recognised as a constitutional institution that reports to Parliament,” it said.

Enhancing service delivery

Musker added that a review of the institutional structure of the local government system through an updated white paper is also in the works.

“It’s a thorough, comprehensive review of the White Paper on Local Government going back to first principles and really thinking about what a fit for purpose local government system would look like for South Africa.

“[This is] including looking at the two-tier system of district and local municipalities, looking at the appropriate powers and functions for municipalities in different categories, [and] looking at the revenue model.

“Taking a thorough look, given the evidence that we have since the first white paper was introduced, in reality of what municipalities are capable of and then putting forward a new model and that will be completed by this time next year,” he said.

Cooperative Governance and Traditional Affairs (CoGTA) Minister, Velenkosini Hlabisa officially published the Review of the 1998 White Paper on Local Government on 10 April with the deadline for public comments set for 30 June 2025.

The anticipated benefits of the review according to CoGTA are that it will enhance service delivery, strengthen financial management, build capacity and result in the engagement of communities.

Operation Vulindlela will also look at local government’s funding model, including the “use of conditional grants” and proposing amendments to the Municipal Finance Management Act (MFMA).

The object of the MFMA is to secure sound and sustainable management of the fiscal and financial affairs of municipalities and municipal entities.

“All of those reforms are interrelated [and] need to be done together, again to tackle the root causes, the structural causes of local government underperformance,” Musker said.

While the document states that local government “is in a state of crisis, with 66% of municipalities in financial distress and 64 out of the 257 deemed dysfunctional,” government is cracking the whip to address the issue with the launch of the second phase. President Ramaphosa stated that growth is the is the only way to achieve fiscal sustainability and social progress.

“That is why we will not yield in our efforts to reform this economy, to fundamentally transform it and to remove the constraints on growth. We have established significant momentum,” he said at the launch.

That momentum will aid in propelling the wheels of the economy forward.

Originally posted on SAnews.gov.za by Neo Bodumela