State of City Finances 2007

This document seeks to tell the story of the financing of the largest city governments in South Africa – in particular, the nine cities that are members of the Cities Network.


Contrary to the negativism often displayed in the media, the tale of city finances in these nine largest municipalities is currently a very reassuring story. Over the last quarter of a century there have been many pressures on these cities. Under apartheid, the white local authorities were in a generally secure financial position, containing most of the local tax base and responsible mainly for the wealthier parts of the cities. But black local authorities – responsible for the majority of the city populations – were in perpetual financial crisis. This crisis continued, with financial instability an ever-present danger in many of the country’s key cities as apartheid was dismantled, as new municipal institutions were established and as service backlogs in black areas were tackled.


South African cities are not merely at a way-station on the road to an inevitably brighter future. On the contrary, our cities are in the midst of a maelstrom of change, touching profoundly on their capacity, effectiveness, even their nature. South African cities have not for some time been in as strong a financial position as they are now. Yet, at the same time, there are seismic shifts taking place in the foundations of city financing, which run the risk of undermining this strength and holding back city development. The revenue base of the cities is being weakened just as they face growing expenditure challenges.


The triple-punch combination of the replacement of RSC levies by a national grant, the potential removal of electricity distribution from city responsibility, and the potential impact of the single public service on city administrations and operations, means that our city administrations could shortly be pale reflections of their true potential. In short, the financial and administrative future of South African cities is in considerable doubt.