The Auditor-General’s latest local government report, released in June 2026, found that none of South Africa’s eight metropolitan municipalities achieved a clean audit in 2024/25. Every metro had problems with financial reporting, compliance with legislation or performance reporting. Together with the companies and agencies they oversee, the metros managed 54% of the country’s total local government expenditure budget that year, making their governance failures a matter of national fiscal significance.
The councils emerging from the November 4 local government elections inherit this record. Their immediate test is institutional: whether they can restore the financial discipline and service reliability that the state’s own audit findings describe as deeply troubled.
The audit findings extend beyond the metros. The Auditor-General determined that nearly half the country’s municipalities, 116 out of 257, adopted budgets they could not realistically afford to fund. Of those, 77 had done so for four consecutive years. That pattern points to a persistent failure of financial planning rather than a one-off lapse.
For the business community, the consequences of weak municipal administration are concrete and costly. Busisiwe Mavuso, Chief Executive of Business Leadership South Africa, says companies are paying for services that municipalities are already supposed to provide, from generators to backup water supplies and additional security. “That is money that could otherwise have gone into expanding their businesses, investing in new productive capacity and creating jobs,” she tells FORBES AFRICA. The problem goes beyond equipment costs: unreliable water and electricity make it difficult to plan production or decide where to expand. “A manufacturer cannot operate competitively if it does not know whether it will have electricity or water tomorrow,” Mavuso says.
Meanwhile, the macroeconomic signals reinforce the concern. A quarterly survey by Rand Merchant Bank and Stellenbosch University’s Bureau for Economic Research found that only 38% of businesses surveyed were satisfied with economic conditions in the third quarter of 2026, down from 47% at the start of the year. Figures released by Statistics South Africa on September 8 showed that investment in buildings, machinery and other long-term assets declined by 0.2% in the second quarter compared with the previous quarter.
Isaah Mhlanga, Chief Economist at Rand Merchant Bank, identifies a gap between confidence in South Africa’s financial markets and what businesses actually experience on the ground. Government bond yields and a relatively stable rand suggest greater confidence in national economic reforms, but that confidence has not translated into stronger investment in the businesses and infrastructure needed to grow the economy. “We believe this has to do with local government risks and constraints,” he tells FORBES AFRICA.
Mhlanga’s argument places local government at the centre of the investment question. Every business operates within a municipality, he notes, making the quality of local administration a material factor in investment decisions. Even where national reforms are improving economic conditions, unreliable municipal services and local political instability can discourage businesses from expanding. He says investors should watch how governing coalitions are formed at local level, and in particular whether cooperation between parties at national level extends down to municipalities. The stability of those coalitions matters because disagreements over budgets, infrastructure spending and service delivery can delay decisions and make it harder for businesses to plan and invest. A fuller account of the polls’ implications for business confidence appears at https://www.forbesafrica.com/current-affairs/2026/11/05/cost-and-uncertainty-of-operating-here-become-too-great-what-the-south-african-municipal-polls-mean-for-business-confidence.
Mavuso warns that the stakes extend well beyond individual firms. “The danger is that companies eventually stop investing in South Africa, not because the country lacks opportunity, but because the cost and uncertainty of operating here become too great,” she said. Her prescription for the new councils is a governance agenda: get finances under control, repair and maintain infrastructure, ensure basic services work and tackle corruption.
She points to precedents within the state itself. Eskom, South Africa’s state-owned electricity company, has seen power cuts fall sharply, and the South African Revenue Service has improved tax collection. Both, in her view, demonstrate that struggling public institutions can recover. Whether the country’s municipalities can do the same is now the question before the councils sworn in after the November vote.