South Africa’s municipalities owe Eskom more than R120 billion, and many are also in arrears to water boards. It is against this balance-sheet strain that President Cyril Ramaphosa has unveiled the Revised White Paper on Local Government, a reform package aimed at restoring the financial and operational viability of the country’s municipalities.
Launched at the Birchwood Hotel and Conference Centre in Ekurhuleni on Thursday under the theme “Every Municipality Must Work: From Policy to Collective Action”, the White Paper sets out a fundamental reassessment of how municipalities are structured, financed, managed and held accountable. The President framed the stakes in commercial terms: investors need certainty, entrepreneurs need predictable municipal decisions, and workers need reliable and affordable access to opportunity. “A growing economy needs towns and cities that work,” he said, adding that when effective water and electricity provision, transport, land-use planning and local regulation fail, they deepen poverty and exclusion.
At the heart of the fiscal reset is a ring-fencing proposal. “Going forward, revenues from the sale of electricity and water will be ring-fenced and used to maintain infrastructure before anything else,” the President said. Utility revenue is often the largest reliable income stream available to a municipality, and the measure is designed to direct it first to keeping the underlying assets functional rather than letting it be absorbed into general spending. Ramaphosa argued that maintenance must become a planned, funded and monitored obligation rather than an afterthought once infrastructure breaks down. “We cannot build our way out of failure if we do not maintain what we have already built,” he warned.
Meanwhile, the White Paper also proposes stronger financial management, improved revenue collection, reduced losses and more effective spending, so that available resources translate into better services. Municipalities, the President said, need credible and sustainable financial arrangements that reflect their different economic circumstances and revenue-generating capabilities. “A metro, a growing secondary city and a rural municipality with a limited revenue base do not face the same conditions. We must therefore organise responsibilities, resources and support more intelligently, so that every municipality has a credible path to success,” he said. He also emphasised that residents who can afford to pay for services should contribute towards their provision, while municipalities must earn public confidence through reliable services, transparent decisions and responsible management of public funds.
A second pillar carries direct implications for the energy and water markets: separating the role of service authority from that of service provider, and introducing compulsory licensing requirements for all water and electricity providers. The proposals aim to strengthen regulation of these essential services while expanding support to municipalities to improve institutional capability and performance. They arrive amid persistent problems with water supply, electricity infrastructure and municipal maintenance that affect households, businesses and the broader economy.
By contrast with the current uniform allocation of powers and functions, the reforms would recognise that municipalities differ significantly in size, revenue, institutional capacity and delivery ability. Responsibilities would be aligned with each municipality’s capacity to perform them, with some functions assigned to other spheres of government or delivered regionally, and partnerships or concession arrangements considered where appropriate. “The White Paper outlines a clear path towards a differentiated model that would link powers and functions to a municipality’s size, capability and performance. It calls for constitutional and legislative amendments to be considered where necessary to implement this,” the President said. He acknowledged that this represents a fundamental change to the local government system, and stressed that national and provincial governments must support municipalities and intervene where necessary. “When mandates overlap, when investment is poorly coordinated or when support arrives only after a crisis, the entire system has failed the community,” he said.
On implementation, Cabinet has endorsed a phased approach supported by a time-bound Local Government Transition Management Body, with coordinated leadership from the Department of Cooperative Governance and Traditional Affairs, The Presidency and National Treasury. The body will ensure reforms are coordinated and commitments implemented, though it will not take over the lawful responsibilities of Ministers, provincial governments, municipal councils or municipal administrations. A single Local Government Transition Plan will set out the reforms, identify responsible institutions, establish a sequence of actions and provide a monitoring framework. The White Paper also calls for coordinated planning, budgets and investment across national departments, provincial administrations, municipalities and state-owned entities, with the District Development Model expected to strengthen that coordination.
Ramaphosa placed economic growth at the centre of the agenda, arguing that reliable water networks, electricity systems, roads and wastewater treatment plants are economic assets and instruments of social justice. He acknowledged the progress made since 1994: more than 90% of households now have access to electricity, more than 87% have piped water, households with municipal piped water rose from 9.2 million in 2004 to just under 16 million in 2025, two-thirds have flush toilets, and the free basic services programme continues to assist millions of indigent households. Yet those gains coexist with unreliable services and municipalities unable to finance essential infrastructure repairs.
The revised policy follows the 1998 White Paper, which dismantled the racially fragmented municipal system inherited from apartheid. “The 1998 White Paper helped us establish democratic local government. The task before us now is to make developmental local government work as it was intended,” the President said, calling for a national undertaking that must outlast any election cycle, municipal term or administration. The launch comes ahead of the Local Government Elections scheduled for 4 November, with Ramaphosa urging registered voters to participate and elected leaders to prioritise municipal functioning. “A disagreement in council must never become an excuse for an unapproved budget, an abandoned project or the collapse of an essential service. Our people must never be held hostage by political instability,” he said.
Whether the ring-fencing of utility revenue can begin to chip away at the R120 billion owed to Eskom will be the first test of whether this fiscal reset changes the balance sheets of South Africa’s towns and cities.