South Africa Unveils R100 Billion Reform Drive to Fix Failing City Services

The reform is designed as a systemic response to structural weaknesses that have undermined service delivery and investor confidence in South Africa’s major cities.

In a sweeping reform aimed at reversing years of declining municipal performance, South Africa’s National Treasury has introduced a performance-based incentive programme designed to unlock R100 billion in investment to improve service delivery across the country’s eight metropolitan municipalities.

The initiative, anchored in the Metro Trading Services Reform, seeks to restore reliability in essential services such as water, electricity, sanitation, and waste management, while rebuilding financial sustainability and public confidence.

Decade of Decline Spurs Urgent Reform

Announcing the intervention, National Treasury Director-General Dr Duncan Pieterse acknowledged the depth of the crisis:

“Over the past decade, we have witnessed the steady erosion of municipal capabilities… infrastructure failures, unreliable services, financial stress, and declining public confidence.”

The reform is designed as a systemic response to structural weaknesses that have undermined service delivery and investor confidence in South Africa’s major cities.

Performance-Based Incentives to Drive Change

At the heart of the reform is a new incentive grant model, which rewards municipalities that meet clearly defined performance targets.

Key features include:

• R54 billion in performance-linked incentives

• R27.7 billion allocated over the medium term

• Incentives tied to Performance Improvement Action Plans

• Focus on three critical services:

  • Electricity

  • Water and wastewater

  • Solid waste management

Participation is voluntary, but designed to encourage compliance through financial rewards rather than penalties.

Ringfencing Revenue to Rebuild Infrastructure

A major structural reform is the ringfencing of municipal revenues generated from service delivery.

Currently, revenues are often diverted into general municipal budgets, resulting in underinvestment in infrastructure.

“This reform ensures that revenues are reinvested into maintaining and upgrading core services,” Pieterse said.

The model introduces integrated management accountability, treating municipal services as self-sustaining business units.

Infrastructure Investment and Governance Reforms

The reform package includes a comprehensive set of measures:

• Legislative changes to strengthen oversight

• Enforcement of funded budgets and recovery plans

• Investment in infrastructure and smart metering systems

• Improved financial management and accountability

These interventions aim to stabilise operations and restore long-term viability.

New Mechanism to Prevent Underspending

To address chronic underspending by municipalities, Treasury has introduced a new provision:

• Unspent funds can be redirected to agencies such as:

  • Development Bank of Southern Africa (DBSA)

  • Municipal Infrastructure Support Agent (MISA)

This ensures funds are still utilised within municipalities, preventing delays and ensuring service delivery benefits reach residents.

Aligning with Operation Vulindlela

The reform is aligned with Operation Vulindlela, the government’s flagship programme to remove structural barriers to economic growth.

Officials emphasised that improving municipal services is critical for:

• Economic productivity

• Investment attraction

• Urban competitiveness

Cities at the Centre of Economic Growth

Pieterse stressed that South Africa’s economic future is closely tied to the performance of its cities:

“Our cities are the engines of economic growth, inclusion, and innovation… if they do not work, South Africa cannot grow.”

A National Priority for Development

Endorsed by Cabinet, the Metro Trading Services Reform is a priority programme of the current administration, aimed at:

• Stabilising urban infrastructure

• Improving service delivery outcomes

• Driving inclusive economic growth

Towards Sustainable Urban Governance

By combining financial incentives, governance reforms, and infrastructure investment, the initiative seeks to transform how cities deliver essential services.

If successfully implemented, the programme could mark a turning point in restoring efficient, accountable, and sustainable municipal governance in South Africa.