For too long, South Africa’s municipalities – particularly those presiding over township economies – have operated on a deeply flawed model.
The belief that revitalising township economies is an insurmountable task is a convenient myth, perpetuated by sophists and apologists of the status quo. The truth is more straightforward: sustainable growth is not impossible if municipalities are run with developmental intent and professional competence.
There is no need to invoke Schumpeter, Acemoglu, Robinson or Fukuyama to understand this. While their insights are intellectually robust, local economic transformation lies in pragmatic action, not academic discourse.
The need for robust municipal governance has never been more pressing.
If municipalities are treated as going concerns – entities expected to function sustainably, attract investment and generate value – they can become true engines of economic growth. National Development Plan targets such as sustainable growth, reduced unemployment and increased exports of value-added products cannot be achieved if the institutions closest to the people are structurally dysfunctional and economically stagnant.
A developmental municipality must leverage its comparative advantage. Whether through agriculture, manufacturing or services, it must create conditions that attract investors and stimulate productive activity. More importantly, it must deliberately cultivate and integrate local small and medium enterprises into the domestic value chain. This is essential for fostering local resilience and nurturing the entrepreneurial spirit within communities.
One of the greatest missteps in township development has been the unchecked proliferation of shopping centres. While they may symbolise progress, they often serve as entry points for large retail chains – Boxer, Shoprite, U-Save – whose business models eclipse the livelihoods of indigenous entrepreneurs. These developments concentrate economic activity in the hands of a few, while weakening community-rooted commerce that historically sustained township economies.
A further concern is “leakage”, where economic benefits are siphoned away from local communities. Most profits generated by large retail chains are not reinvested locally but are absorbed by parent companies or international stakeholders. The model may bring immediate convenience, but it undermines long-term sustainability.
Instead of focusing solely on external retail development, municipalities should build integrated, locally-owned business ecosystems that span manufacturing to services. A balanced, community-centred strategy would encourage local entrepreneurs and attract the investment needed for long-term prosperity.
What Must Change?
To transform municipal performance and unlock inclusive growth, four interventions are essential:
- Meritocracy in recruitment: Municipalities must be led and staffed by competent professionals, not political deployees. Skills and integrity should be the baseline. This requires a shift towards a meritocratic system where expertise in urban planning, economics and public administration is prioritised. Skilled professionals make informed, data-driven decisions that benefit the public.
- Insulate governance from political meddling: Political interference breeds instability and mismanagement. Municipal administration must be allowed to operate independently and with accountability. Too often, political appointees prioritise personal or party interests over community development needs. This undermines trust and inhibits long-term planning. Stricter policies must insulate public administration from political influence.
- Reduce the cost of doing business: Municipalities must invest in infrastructure, refurbish old industrial buildings and make services efficient and affordable for entrepreneurs. Ease of doing business is a decisive factor for investment. Reducing bureaucratic red tape, improving access to finance for small businesses and upgrading roads and energy supply will make municipalities more attractive to local and foreign investors.
- Broaden the revenue base: Beyond property rates and utility billing, municipalities must innovate – leveraging land assets, facilitating the formalisation of informal traders and forming public-private partnerships. Expanding the revenue base through sustainable methods will reduce reliance on national transfers and enable localised investment in community development.
A Developmental Mindset Is Non-Negotiable
If municipalities adopt a truly developmental mindset, the national economy could consistently grow by 6-7% annually. But this requires breaking from the current “beggar-thy-neighbour” mentality, where competition among municipalities is short-sighted and self-defeating.
What is needed is a cooperative vision grounded in strategic investment, local empowerment and policy coherence. Municipalities must stop viewing neighbours as competitors and start seeing them as partners in regional development.
The success of Scandinavian municipalities proves sustainable growth is not utopian. It simply requires a systemic shift towards development-focused governance, where leaders prioritise long-term community well-being over short-term political gain.
Lessons from the Nordic Model
Municipalities in Sweden, Denmark and Finland have shown local governance can drive inclusive growth. They prioritise sustainable, long-term development over short-term gains. Key elements include:
Public-private partnerships that collaborate with SMEs to foster entrepreneurship and innovation, offering infrastructure, incentives and tax benefits.
Decentralised governance that empowers municipalities to tailor policies to their unique economic circumstances and build robust local economies.
South Africa can draw valuable lessons from this model: integrate SMEs into the economic ecosystem, build partnerships, and ensure governance is based on merit and independence.
Municipalities must move away from beggar-thy-neighbour thinking towards collaboration, innovation and a shared vision for prosperity. Only then can they become the engines of growth South Africa desperately needs.
MADUME HANGULA IS AN ECONOMIST. HE WRITES IN HIS OWN CAPACITY.
