The reform engine has stalled at street level as SA's progress is blunted by municipal failures

Latest Business Leadership South Africa (BLSA) improvement tracker Shows that although South Africa's reform program is moving forward, gains are uneven – and in some key areas, momentum is slowing.

The tracker's overall completeness index has increased by 27% to 71.75 since March 2024, suggesting that the structural reform agenda has been taken forward Operation Vulindela Delivering measurable progress.

But beneath that headline number lies a more complex reality.

The quarterly pace has slowed sharply, with gains of just 0.4 points in the latest quarter, while governance – a fundamental pillar of the reform – has shown no movement for the second consecutive quarter.

And in freight logistics, which is a major bottleneck to growth, the index has actually declined.

For Junaid Kader, head of public-private partnerships and infrastructure at the integrated workplace management solutions provider tseboThe message is clear: South Africa's reform program is working – but it is hitting structural limitations that are becoming difficult to ignore.

“South Africa's infrastructure difficulties arise from governance, fiscal discipline and asset management crises,” Kader said. What appears to be an engineering failure turns out to be a financial governance crisis, the visible expression of deep structural gaps that have built up over time.

“Infrastructure has often been delivered without a real lifecycle approach,” he explained. “Assets are built and commissioned, but long-term planning, funding, staffing, systems to maintain them are not always followed. Decisions have historically been driven by upfront capital cost rather than total cost of ownership over the lifetime of the asset.”

A reform program that is working on paper

Operation Vulindela, a joint initiative between the Presidency and National Treasury, was designed to address structural barriers to development – ​​from electricity and logistics to water, visas and digital infrastructure.

Its Phase 2 Progress Report Shows solid movement on multiple fronts.

In the electricity sector, reforms are moving towards a competitive market with the establishment of Eskom Restructuring Task Team and progress toward an independent transmission system operator.

In logistics, steps are being taken towards the creation of a transport economic regulator as well as opening up of rail and ports to private participation.

In the water sector, institutional reforms and investment pipelines are expanding, with projects worth more than R100 billion under development.

And in Visa, the roll-out of Digital systems and new categories Its aim is to attract skills and investment.

Overall, these reforms are designed to “reduce input costs, improve competitiveness, and create opportunities for private investment in key sectors of the economy,” according to the report.

but the system is breaking down

The problem, increasingly, is not the design of reforms, but their implementation.

The BLSA tracker points to a structural tension at the heart of the reform process: state-owned entities like Eskom and Transnet are implementing and resisting change.

“This framework clearly encourages Eskom and Transnet to put their own interests first,” says BLSA CEO Busisiwe Mavuso. He warned that institutional resistance could slow reform progress.

But still that is not the most serious obstacle.

The deeper issue is closer to home – at the municipal level.

'Our main problem is local government'

This was clearly stated by Cooperative Governance Minister Welinkosini Hlabisa during the BLSA event.

“We have agreed and confirmed that our main problem is the place of local government,” he said.

Its implications are far reaching.

“Any local government reform is an economic reform,” Hlabisa said, adding that South Africa's growth trajectory fundamentally depends on whether municipalities function effectively.

He said, “It is at the municipal level where the economy either succeeds or fails. If municipalities are dysfunctional, South Africa will not function and the economy will not grow.”

front line of failure

The consequences of municipal dysfunction are immediate and visible.

Businesses face unreliable power distribution, disruptions in water supply, poor road infrastructure, and delays in approval and licensing processes.

“These challenges increase the cost of doing business and reduce competitiveness,” Hlabisa said.

Many companies have been forced to invest in private solutions – from generators to water storage – taking resources away from expansion and job creation.

At the same time, investors are becoming increasingly cautious.

“They ask whether the infrastructure is reliable, whether services are stable and whether municipal processes are efficient,” he said.

Where the answer is no, investment goes elsewhere.

A governance problem at its core

At the root of the municipal crisis is governance failure.

Hlabisa did not hesitate to identify the reasons.

“What is causing this problem… the deployment was at the Centre,” he said, pointing to politically motivated appointments and lack of technical capacity.

“The ability for political leadership… is wanting in most of them.”

This has created a system in which weak governance leads to weak governance, resulting in financial crises, decaying infrastructure and service delivery failures – a cycle that reinforces itself over time.

He said, “Financial weaknesses accelerate the decay of infrastructure, and service delivery failures erode trust. That cycle must be broken.”

improvement meets reality

This is where the tension between national reform and local implementation is most visible.

Operation Vulindlela can set policy frameworks, pass laws and coordinate reforms across all sectors.

But it can't fix a municipality that can't manage its finances, maintain infrastructure or process approvals efficiently.

That gap is increasingly defining the boundaries of South Africa's reform story.

The BLSA tracker shows this disconnect. While areas such as financial sector reforms and criminal justice are showing strong gains, governance – which includes local government performance – remains the weakest and slowest-moving category.

increased risk

The performance of a municipal corporation determines everything from the cost of doing business to the pace of investment and employment generation.

And as Hlabisa pointed out, every business – big or small – operates in a municipal context.

“If that local place is idle, it impacts the entire economy,” he said.

so Municipal reforms It is now being considered as a central pillar of the macroeconomic reform agenda.

Can the system be fixed?

There are signs that the government is beginning to grapple with the problem head-on.

The latest report from Operation Vulindlela highlights the growing momentum in local government reform, including the launch of Metro Trading Service Improvement Program and progress on a new white paper on local government.

These reforms aim to professionalize administration, improve financial management, and strengthen accountability.

But these are long-term interventions.

The immediate challenge is to stabilize municipalities and restore basic functionality.

Speaking at the launch of the Metro Trading Services Reform Program in March, the Director-General of the National Treasury, Duncan Pieterse, said Budget 2026 confirmed a R1-trillion public investment plan over the medium term, of which municipalities are responsible for R205-billion and major allocations to transport, water and energy.

“The question before us is the following: What reforms will ensure that the R205 billion spent by municipalities is spent efficiently and effectively in the interest of service delivery and development?” he asked.