Municipal dysfunction is now a national economic risk, says BLSA CEO Busisiwe Mavuso

In the run up to South Africa’s 2026 municipal elections, the spotlight is on the state of local government – not just as a political issue, but as an economic one.

Municipalities are the engines of local economies – they provide the infrastructure, services, and governance that businesses rely on to invest, to create jobs, and to grow. Yet, across much of the country, deteriorating service delivery, weak finances, and governance failures are undermining confidence and holding back that economic potential.

In the latest PSG Think Big webinar, award-winning journalist Alishia Seckam sat down with Busisiwe Mavuso, CEO of Business Leadership South Africa (BLSA), to break down what it will take to build better-run, more competitive cities that can support inclusive growth and attract investment.

“This year's municipal elections are rather important,” said Mavuso. “They are important because when you look at the state of our municipalities, a lot of them are seriously eroding, deteriorating, and failing to provide the basic services for which they were designed to provide.”

This has direct implications for business confidence and investment. As municipalities struggle to deliver reliable services, companies are increasingly being forced to absorb the cost of state failure. “You are seeing businesses having to invest in backup power, in water storage, in road repairs, in private security, in logistics, on alternatives, in infrastructure maintenance, simply to remain operational.”

While the full cost of municipal dysfunction is difficult to quantify, Mavuso warned that businesses often respond by redirecting investment elsewhere. “A lot of businesses quietly choose to disinvest, without making too much noise.”

She pointed to the pressure on manufacturing hubs such as Nelson Mandela Bay, where companies have had to take on responsibilities that should ordinarily sit with municipalities. “You have VW, for instance, adopting four substations, which means that if there's anything wrong with those energy substations, it is VW's responsibility.”

For multinational companies, this weakens South Africa’s investment case. “Those investment decisions are not made in South Africa; they are made elsewhere in the world,” said Mavuso. “Remember, capital is not sentimental. Investors allocate capital based on risk. They allocate capital based on stability, predictability, and returns.”

Johannesburg, in particular, has become a central concern. As South Africa’s commercial capital, the city’s decline is no longer a local issue alone. “Remember, Joburg is key to the South African economy. This is where 16% of the country's GDP is generated. So, its performance is critical to national growth.”

Mavuso said the city’s deterioration has reached a point where businesses can no longer remain quiet. “Joburg's decline has reached a point where silence would be irresponsible from a business perspective. The situation has become urgent.”

She added that BLSA refuses to accept the city’s decline as inevitable. “We refuse to accept that Joburg's decline is inevitable. We refuse to accept that the failure of the city of Joburg should be normalised.”

The scale of the challenge has placed local government reform firmly on the national agenda, with Operation Vulindlela’s second phase focusing on municipalities. “The issue of municipalities is not just about the one small municipality; it is a national economic issue,” said Mavuso, who notes the most important development is that the reform process has begun, and that businesses are willing to support it if there is serious political commitment.

“At a national level, we’ve seen improved operational performance of Eskom and Transnet. We would now like to take that to the city of Joburg, but we need a counterparty in the city of Joburg that is serious about turning the turning the city around. Otherwise, it's really going to be an absolute waste of our time.”

A key reform priority is the ring-fencing of municipal utility revenues. Mavuso referenced the City of Johannesburg’s water revenue as an example of the disconnect between what residents and businesses pay, and what is reinvested into infrastructure. “The City of Joburg collected R11.9 billion in water revenue, and yet only R1.3 billion was actually utilised for anything water-related.”

She also highlighted the need to professionalise the public service and intervene earlier when municipalities are failing. The problem, she said, is not simply one of strategy, but of capability and accountability. “It is a function of incompetence; of having CFOs, for instance, who don't know the difference between income and cash.”

Coalition politics will continue to shape the municipal landscape, but Mavuso believes multiparty government can work if parties are focused on service delivery. “Once we have the coalition of the right political parties, it can actually work. And this is where voting matters.”

She stressed that voters need to recognise the connection between politics and economic outcomes. “This is where we really have to start understanding as South Africans that the economics and politics are two sides of the same coin.”

Despite the scale of Johannesburg’s infrastructure backlog, Mavuso believes the problems are not impossible to fix, provided there is political will and the right partnership with the private sector. “The challenges that we are facing, in Joburg and from a broader municipal perspective, are not unfixable.”

On water, for example, she argued that practical interventions could deliver visible improvements within a relatively short period. “This is something that we can actually deal with within six months to a year, but you have to have political will on the other side.”

The broader reform agenda, however, must not lose momentum. Mavuso warned that reforms are not once-off achievements but ongoing processes that require sustained implementation. “These reforms are not events; they are a process. And unless that process continues, the gains and the green shoots that we have seen as a country are going to be reversed.”

For businesses, this means remaining constructive, but not silent. “Calling government out on these issues is not confrontation. It is merely calling for accountability, which is a necessary condition for investment. We need them to commit to measurable reforms. Business is going to be constructive, but it's definitely not going to be silent”