Economic growth is the result of a well-functioning system and service delivery needs to be fixed to unlock local economic growth, which requires governance to be fixed, President Cyril Ramaphosa Mentioned while addressing the 2026 National Local Economic Development Summit in Boksburg on 15 April.
Local economies should be reimagined with small business development at the centre, he said, adding that local government is the engine room of growth and metro, district and local municipalities should see themselves as incubators of economic activity.
A strong entrepreneurship culture supported in cities and towns contributes to job creation and small business growth, he said.
South Africa has a resilient entrepreneurial sector that is increasing its contribution to economic activity and job creation.
However, the entrepreneurship ecosystem also faces challenges within local government that constrain economic opportunity and potential, he said.
“The Auditor General's reports on local government consistently highlight weaknesses that directly undermine service delivery and impede local economic growth, including weak financial management and revenue collection, failure to maintain infrastructure, ineffective supply chain management, unregulated and wasteful expenditure and weak results management.
“These translate into unreliable electricity, water insecurity, bad roads, poor service delivery and an unsafe business environment.”
He directed that South Africa must address service delivery bottlenecks at the local government level, particularly by providing infrastructure, as energy security, water provision, roads and rail lines are the foundation of development.
Municipalities must work to remove infrastructure bottlenecks, but at the same time they do not adequately prioritize infrastructure maintenance.
National Treasury guidelines require municipalities to budget 8% of the carrying value of property, plant and equipment for maintenance and repairs. He pointed out that many municipalities have less than 1% of their budget.
Some cities and municipalities have done well in improving the ease of doing business, with systems and goals in place for zoning approval, issuing construction permits, connecting businesses to water and electricity, and issuing business and trade licenses, as well as using electronic registration systems.
In these cases, there is regulatory certainty.
However, these municipalities are the exception rather than the rule. Often bureaucratic delays at the municipal level deter local investment, Ramaphosa said.
Local governments should pursue their own red tape-reducing reforms. He directed that they should also continuously engage with local trade associations and forums to understand their frustrations and address their concerns.
Ramaphosa said municipalities contribute most effectively to development through the provision of reliable basic services and maintenance of predictable infrastructure, transparent and timely approvals for development, and effective urban management.
local purchasing
Municipalities contribute to development by using procurement to support local small businesses and ensuring supplier payment discipline. He said that municipality's contribution to development should be a systemic outcome and not a project work.
“To achieve this, we are formalizing a plan of district development model as a binding economic transformation agreement.”
These agreements will be implemented through specific sector compacts for priority nodes and corridors with sequenced investments in transport, bulk services and enabling business infrastructure.
He alleged that these plans should clearly articulate local growth drivers and how they can be supported in line with the country's broader industrial policy.
The important question is of capacity. Professionalizing municipalities and ensuring that governance structures are efficient, accountable and inclusive will enable local government and communities to realize these plans.
Ramaphosa said, “Appointments must be made on the basis of merit, relevant skills, experience and qualifications, while holding people to strong ethical standards. The scale of the challenge before us requires a national agreement for local economic development.”
“When infrastructure is built, we must look at local suppliers, local contractors and local jobs. We need to create regional ecosystems where government, universities, incubators, traditional leaders and the private sector collaborate to unlock local growth drivers.
“We call on established businesses to partner with municipalities, develop local suppliers, invest in skills and open up value chains.”
He said the summit should present a program of action with clear deliverables and timelines.
“South Africa is a nation of entrepreneurs. Our job is to unleash their potential to create an inclusive economy that creates opportunities for all.”