South Africa’s municipal reforms fall behind schedule as councils’ Eskom debt hits $7.4bn

Two of South Africa’s four priority municipal reforms are behind schedule as local government debt to state-owned electricity utility Eskom reaches ZAR122.5bn ($7.4bn), adding to financial pressures that threaten basic services and the utility’s recovery.

The government’s Operation Vulindlela programme classified two municipal reforms as delayed or off track in its second-quarter progress report, covering the three months to September 2026, Moneyweb reported on November 10.

The delayed measures involve professionalising senior municipal appointments and reviewing the local government fiscal framework, including conditional grants. A shift towards financially sustainable water and electricity utilities remains on track, and a review of the institutional structure of local government has been completed, although further work remains.

The fiscal framework review is the more consequential delay. Professor Dirk Kotzé of the University of South Africa said the government had acknowledged that municipalities’ share of about 10% of the national budget was inadequate, but increasing it could require cuts to provincial allocations, Moneyweb reported. Proposals from the review are expected in December. The government approved a revised White Paper on Local Government in September and launched it on October 22, while the draft Local Government: Municipal Finance Management Amendment Bill has been published for public comment.

The shift to a utility model is being driven through the six-year Metro Trading Services Reform Programme, which has entered implementation and is supported by ZAR54bn in performance-based grants for the eight metropolitan municipalities. Allocations in 2027/28 will depend on the metros’ progress in reforming their trading services.

Municipalities owed Eskom ZAR122.5bn at the end of August, according to electricity and energy minister Kgosientsho Ramokgopa. National Treasury figures cited by Reuters show households and businesses owe municipalities ZAR484.5bn, while councils collect only 63.9% of amounts billed, undermining their ability to pay electricity and water suppliers. Only eight of the 71 municipalities participating in the government’s debt-relief programme were complying with its conditions, Reuters reported on November 3.

The pressure has been building for years. A July assessment by Ratings Afrika found that South Africa’s 128 largest municipalities recorded combined operating deficits of ZAR39bn in the financial year ended June 2025, up from ZAR35bn a year earlier. Their aggregate liquidity shortfall widened to ZAR129bn from ZAR107bn.

Operation Vulindlela separately acknowledged significant challenges in reforming electricity distribution. The government is pursuing Distribution Agency Agreements (DAAs), under which Eskom can assume electricity distribution and revenue-collection functions on behalf of municipalities, as part of efforts to recover arrears.

Matthew Cruise, an energy analyst at Jaltech, said Eskom-run distribution could improve collections, but from the municipalities’ perspective it “would mean losing a revenue stream”, he told Moneyweb.

The reform delays were recorded ahead of the November 4 municipal elections, in which the African National Congress (ANC) secured a record-low 30.76% of the vote. Seven of the country’s eight metropolitan councils emerged without a majority party, leaving incoming administrations facing coalition negotiations alongside mounting financial and service-delivery pressures.

See IntelliNews: South Africa’s ANC falls to record-low 30.8% as seven of eight metros head into coalition talks
See IntelliNews: South Africa’s municipalities “failing” owing to underspending on infrastructure and maintenance, report warns