A CRITICAL REVIEW OF THE LOCAL GOVERNMENT FISCAL FRAMEWORK

This research paper by the Public Affairs Research Institute (PARI) evaluates the local government fiscal framework in South Africa, arguing that the structural assumptions made in the 1998 White Paper on Local Government are fundamentally unsound and have led to widespread municipal financial distress and the erosion of the social wage.

• The 1998 White Paper on Local Government assumed that municipalities could fund 90% of their recurrent operating expenditure from own revenue, specifically that property rates and service charges would cover 73% of these requirements. However, PARI research indicates that in aggregate, local government likely funds less than 50% of budgeted operating expenditure from these sources, with the gap being most severe outside metropolitan areas.
• Municipal finances are in a state of collapse, with the Auditor-General of South Africa (AGSA) reporting in 2018/19 that 79% of municipalities had a financial health status that was either concerning or required urgent intervention, and 31% were in a particularly vulnerable position.
• The 'social wage'—the provision of affordable and subsidised basic services to poor households—is being eroded because the fiscal framework forces municipalities to constantly increase tariffs to fill funding gaps, thereby deepening poverty and inequality.
• Municipal debt has risen significantly, reaching over R181 billion by March 2020, with approximately 70% of this debt owed by households. The largest portions of this debt are attributed to property rates (R50.21 billion) and water (R36.18 billion), rather than electricity.
• The direct retail supply of electricity by Eskom to over 50% of households undermines municipal credit control, as municipalities cannot disconnect electricity to compel the payment of other debts, such as water and property rates.
• There is a critical underfunding of infrastructure maintenance, which was intended to be financed by own revenue. Estimates suggest a funding gap of approximately R14 billion per annum for maintenance, contributing to a state where sanitation infrastructure outside metros is rated as 'unfit for purpose'.
• Local government faces an excessive regulatory and reporting burden that diverts scarce resources away from service delivery. The South African Law Reform Commission noted that 95% of municipalities receive similar information requests from both provincial and national governments.
• The envisioned municipal debt markets and alternative funding arrangements have failed to materialise at scale. Borrowing has historically contributed no more than 15% to the funding of capital expenditure across all municipalities.
• PARI argues that the current crisis is structural rather than purely organizational; therefore, spending on 'capacity building' and municipal support programs (estimated at R50 billion over 15 years) has had little effect because the underlying fiscal framework is dysfunctional.

APA

LEDGER, T., & RAMPEDI, M. (2020). A CRITICAL REVIEW OF THE LOCAL GOVERNMENT FISCAL FRAMEWORK. Public Affairs Research Institute. https://pari.org.za/wp-content/uploads/2020/08/20200826_EndOfTheRoad_LedgerRampedi_Report-1.pdf

Chicago

LEDGER, TRACY, and MAHLATSE RAMPEDI. A CRITICAL REVIEW OF THE LOCAL GOVERNMENT FISCAL FRAMEWORK. Public Affairs Research Institute, 2020. https://pari.org.za/wp-content/uploads/2020/08/20200826_EndOfTheRoad_LedgerRampedi_Report-1.pdf.

Wikipedia

{{cite report |last1=LEDGER |first1=TRACY |last2=RAMPEDI |first2=MAHLATSE |title=A CRITICAL REVIEW OF THE LOCAL GOVERNMENT FISCAL FRAMEWORK |publisher=Public Affairs Research Institute |date=August 2020 |url=https://pari.org.za/wp-content/uploads/2020/08/20200826_EndOfTheRoad_LedgerRampedi_Report-1.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{ledger2020critical, author = {LEDGER, TRACY and RAMPEDI, MAHLATSE}, title = {{A CRITICAL REVIEW OF THE LOCAL GOVERNMENT FISCAL FRAMEWORK}}, institution = {Public Affairs Research Institute}, year = {2020}, month = aug, url = {https://pari.org.za/wp-content/uploads/2020/08/20200826_EndOfTheRoad_LedgerRampedi_Report-1.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }