South African President Cyril Ramaphosa says about two-thirds of the country’s municipalities are in financial distress, warning that weak revenue collection and poor financial discipline are undermining service delivery across the country.

In his weekly newsletter released on Monday, Ramaphosa said many municipalities are struggling with rising debt and ineffective management of public funds.

“A number of municipalities are characterised by poor revenue management and rising municipal debt. Audit outcomes show that around two-thirds of municipalities are in financial distress,” he said.

The president warned that unless local governments strengthen revenue management and enforce stricter financial discipline, service delivery problems will continue to worsen.

Redirected resources

“The revenues collected from service provision are meant to be reinvested into maintaining and upgrading infrastructure to improve service delivery. However, in far too many instances these resources are redirected to cover other costs,” he said.

To help address the challenges, the government says it has allocated 27.7 billion rand (about $1.5 billion) over the next three years to encourage major metropolitan municipalities to reform key services including water, sanitation, solid waste management and electricity.

Ramaphosa said the government is also reforming the municipal infrastructure grant to tackle persistent underspending, misuse of funds and capacity constraints in local government.

Reforms are also underway in the energy, water, telecommunications and logistics sectors to improve the efficiency and competitiveness of South Africa’s economy, Ramaphosa adds.

He stressed that effective local government is critical to economic growth and community wellbeing.

“When local government fails, the impact is felt by communities, businesses and households. When local government works well, villages, towns and cities become engines of opportunity and growth,” he said.