BLSA CEO Busi Mavuso said business remained committed to partnering with government to improve municipal performance, similar to the collaboration that has helped stabilise Eskom and improve Transnet's operations.
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Business Leadership South Africa (BLSA) has warned that deteriorating municipal governance has become one of the biggest threats to South Africa's economic growth, saying businesses are increasingly being forced to compensate for government failures at significant cost.
Speaking during PSG's Think Big series on Tuesday, BLSA CEO Busi Mavuso said the upcoming 2026 local government elections represented far more than a political contest, arguing that they would determine whether municipalities can once again become engines of economic growth and attract much-needed investment.
"I think this year's municipal elections are rather important because when you look at the state of our municipalities, a lot of them are seriously eroding and deteriorating," Mavuso said.
"A lot of them are failing to provide the basic services for which they were designed. From a business perspective, this is particularly concerning because even some of the bigger metros are failing, which places a huge burden on businesses to increasingly manage around state failure."
She said companies were spending billions of rand on backup power, water storage, private security, road repairs and alternative logistics simply to remain operational.
"The cost of doing business has become one of the biggest constraints on economic activity," she said.
Although it is difficult to quantify the total economic cost of municipal dysfunction, Mavuso said poor service delivery was increasingly influencing investment decisions by multinational corporations.
She cited examples of manufacturers operating in the Nelson Mandela Bay region that have been forced to maintain public infrastructure themselves, including electricity substations, roads, schools and water leaks.
"You have Volkswagen, for instance, adopting four substations, which means that if there is anything wrong with those energy substations, it is VW's responsibility to make sure that it is taken care of. They adopt substations, potholes, schools, leaks – absolutely everything. You cannot continue to operate an environment like that," she said.
According to Mavuso, South Africa is weakening its case for attracting global investment because multinational companies compare investment opportunities across different countries.
"Capital is not sentimental. Investors allocate capital based on risk, stability, predictability and returns. If our infrastructure deteriorates, if municipalities fail, investors will redirect capital elsewhere," she said.
She described the City of Johannesburg's decline as a matter of national economic concern rather than simply a local government issue.
Mavuso noted that Johannesburg generates about 16% of South Africa's gross domestic product and hosts around 70% of the country's corporate headquarters, making the city's performance critical to the national economy.
"Joburg's decline has reached a point where silence would be irresponsible from a business perspective. We refuse to accept that the failure of the City of Joburg should be normalised," she said.
Despite the challenges, Mavuso said business remained committed to partnering with government to improve municipal performance, similar to the collaboration that has helped stabilise Eskom and improve Transnet's operations.
She said BLSA had contributed R20 million towards Operation Vulindlela's municipal reform programme, but stressed that meaningful partnerships require committed political leadership.
"We would now like to take that same business-government partnership to the City of Joburg, but our condition is that we need a counterparty in the city that is serious about turning it around," she said.
Among the reforms she welcomed are proposals to ring-fence municipal utility revenues, professionalise municipal administrations and allow the National Treasury to intervene earlier when municipalities show signs of failure.
She criticised the current management of municipal finances, citing National Treasury figures showing that the City of Johannesburg collected R11.9 billion in water revenue while spending only R1.3 billion on water-related infrastructure.
"The money is actually there. We are paying for our services, but it is not being spent on maintaining the infrastructure it was collected for," she said.
Mavuso also argued that South Africa's broader economic reform programme must continue without interruption if the country hopes to attract investment and create jobs.
She warned that recent signs of slower implementation at Eskom and Transnet were already beginning to undermine investor confidence.
Looking ahead to the municipal elections, Mavuso urged voters and political parties to recognise that local government performance has national consequences.
"The issue of municipalities is not just about one municipality. It is a national economic issue. If cities cannot provide reliable electricity, water, roads, safety and basic governance, they weaken South Africa's growth story," she said.
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