Municipal Governance Report Card 2026

municipal-finance is the focus of this analysis. The piece below sets out the framework, the regulatory context, and the practical implications for South African organisations.

South Africa's local government is under sustained pressure: only 34 of 257 municipalities (13%) achieved clean audits in 2022/23, and reform is urgently needed.

This report card, prepared by Kettle Consulting from the Auditor-General South Africa's consolidated report on local government audit outcomes 2022-23, Stats SA's non-financial census of municipalities, CoGTA strategy documents, and recent Parliamentary Budget Office briefs, grades the local government system across five dimensions and sets out the strategic priorities for the 2026-2030 cycle.

The headline numbers are stark. 86% of municipalities received material compliance findings, a regression from 83% in 2020/21. According to Parliament's Budget Office, 39 municipalities have been under section 139 intervention since 2020/21, with 21 new interventions imposed in three financial years. Yet pockets of excellence — councils that have sustained clean audits despite the same fiscal and governance pressures — show that the trajectory is not preordained.

Why local government's condition matters

South Africa's 1996 Constitution establishes local government as a distinctive sphere with its own powers and functions. Municipalities deliver water, sanitation, electricity distribution, refuse removal, and local roads. Section 152 of the Constitution requires them to be "developmental" — to structure administration, budgeting, and planning to give priority to the basic needs of communities and promote social and economic development.

Stats SA's 2023 non-financial census of municipalities reports that the number of households receiving services from municipalities has increased for all four major service areas (water, electricity, sanitation, and solid waste) compared with a decade earlier. However, the number of households receiving free basic services declined between 2022 and 2023, indicating fiscal and targeting constraints.

In November 2024, Stats SA reported that access to drinking water increased from 85.1% to 88.5% of households between 2011 and 2022, and sanitation coverage rose from 68.9% to 80.7%. These gains exist alongside serious governance failures, infrastructure backlogs, and uneven service quality.

Audit outcomes and financial governance

The audit picture, 2022/23

AGSA's consolidated general report on local government audit outcomes for 2022/23 paints a stark picture. Only 34 of 257 municipalities and municipal entities (13%) achieved clean audits — financial statements unqualified, no material findings on performance reporting and compliance with legislation. A large share of municipalities continued to receive qualified, adverse, or disclaimed opinions, with some reduction in disclaimers but persistent weaknesses in basic record-keeping and financial reporting.

Material non-compliance with legislation, including the Municipal Finance Management Act (MFMA), remains widespread. In 2022/23, 86% of municipalities received material compliance findings. Irregular, unauthorised, fruitless, and wasteful expenditure continues to be high, reflecting weak procurement controls, poor planning, and limited consequence management.

Commitments made by political and administrative leaders to improve governance have generally been too slow and have not translated into material changes in the lived realities of citizens.— Auditor-General South Africa, Consolidated general report on local government audit outcomes 2022-23

Financial sustainability under strain

Beyond audit opinions, financial sustainability is under strain in many municipalities. AGSA highlights that local government finances face increasing pressure from weak cash management, poor revenue collection, and growing debt to bulk service providers.

• High consumer debt: municipalities struggle to collect billed revenue for services such as electricity and water.
• Arrears to bulk providers: significant amounts owed by municipalities to Eskom and water boards, contributing to a cycle of interrupted supply and emergency interventions.
• Under-investment in renewals: asset maintenance is deferred, leading to deteriorating infrastructure and higher long-term costs.

Earlier analysis by CoGTA and the Financial and Fiscal Commission estimated that municipalities face an infrastructure renewals backlog of approximately R20-R40 billion in each of water, sanitation, and electricity sectors. Annual renewals spending falls far below what would be needed to catch up. The backlog undermines service reliability and exposes municipalities to growing climate and disaster risks.

Service delivery and infrastructure

Coverage trends

Stats SA's 2023 non-financial census provides the most current snapshot of service-delivery coverage. Between 2022 and 2023, consumer units receiving water services from municipalities increased modestly. Consumer units receiving electricity services also increased, though electricity recorded one of the lowest percentage increases among the four main services. Solid waste management showed the highest growth in consumer units served, followed by sewerage and sanitation.

More households are connected to municipal networks, but the pace of expansion is constrained by fiscal capacity and technical challenges. The decline in households receiving free basic services suggests that municipalities are adjusting targeting or reducing subsidies under budget pressure.

Quality and reliability

The condition and reliability of municipal infrastructure is a serious concern. Frequent water supply interruptions and high non-revenue water — leaks, illegal connections, billing failures — are widespread. Wastewater treatment works operate beyond capacity or out of compliance with discharge standards, creating environmental and health risks. Ageing electricity distribution networks suffer from insufficient maintenance, leading to outages, safety risks, and technical losses.

These challenges are compounded by climate-related shocks — floods, droughts — which place additional stress on poorly maintained assets and emergency response capacity.

Institutional capacity, governance, and political dynamics

Capacity and skills

AGSA attributes much of the poor audit performance and financial mismanagement to weaknesses in institutional capacity and governance culture. Common findings include shortages of appropriately qualified and experienced staff in critical positions (municipal managers, chief financial officers, engineers), high reliance on consultants for financial reporting functions (often without effective skills transfer), and weak internal audit and audit committee functions that fail to detect or correct problems in a timely manner.

CoGTA's strategic documents stress the need to build a capable, ethical, and developmental state at local level — including professionalising the public service and improving recruitment, performance management, and training.

Political instability and hung councils

The 2021 local government elections produced a record number of hung councils — councils where no single party holds a majority — especially in metropolitan and larger local municipalities. Research on governance performance notes that these configurations have often resulted in unstable coalitions, frequent leadership changes, and disruptions to administrative continuity.

The instability complicates governance and service delivery. Municipal councils struggle to adopt budgets and integrated development plans on time. Senior management appointments become politicised or subject to frequent change. Strategic projects and reforms stall as coalitions shift. CoGTA has signalled its intention to review the legislative framework governing local government, including mechanisms for managing hung councils and enhancing stability.

Accountability and oversight

The oversight architecture for local government includes municipal councils and their committees, provincial CoGTA departments, AGSA, the National Council of Provinces, and Parliament. Despite this framework, accountability failures remain widespread. AGSA points to weak consequence management: officials responsible for irregular or wasteful expenditure are seldom held to account, and repeat audit findings are common.

A 2025 research brief by Parliament's Budget Office on section 139 and 154 interventions concludes that provinces have often relied on interventions as a reactive response to crises rather than using proactive support and monitoring to prevent governance failure.

Section 139 interventions: the prevalence of reactive governance

Section 139 of the Constitution allows provincial executives to intervene in municipalities that fail to fulfil their executive obligations — by issuing directives, assuming responsibilities, or dissolving councils in severe cases. As of February 2022, CoGTA reported that 31 municipalities were under some form of section 139 intervention, spread across all nine provinces.

A 2025 brief by Parliament's Budget Office, reviewing 2020/21 to 2022/23, found that 39 municipalities were under intervention in that period, with 21 new interventions imposed during those three financial years. Some interventions have been in place for many years, suggesting limited success in restoring governance and service delivery to sustainable levels.

Parliament's analysis characterises the current pattern of interventions as largely reactive, focused on crisis management rather than systemic prevention. Interventions often occur only after severe financial distress or service-delivery collapse has already taken root. There is variability in the quality of intervention plans, the clarity of roles and responsibilities, and the monitoring of progress.

In some cases, there is limited evidence that underlying structural problems — weak revenue bases, inadequate skills, political interference — have been resolved when interventions are lifted. The pattern raises questions about how section 139 and section 154 (support and capacity-building) can be better integrated into a more proactive, developmental approach.

Emerging reforms and support initiatives

CoGTA's strategic repositioning

In November 2024, CoGTA convened a two-day strategic planning session with provincial departments, public entities, and SALGA to chart a new course for transformative governance and service delivery. The session, aligned with the Medium-Term Development Plan, emphasised three imperatives under the Government of National Unity: inclusive growth and jobs, poverty reduction, and a capable, ethical state.

CoGTA reiterated the theme "Every Municipality Must Work" and reaffirmed the centrality of the District Development Model (DDM), which integrates planning and implementation across spheres of government and sectors at district and metropolitan levels. The DDM is intended to reduce fragmentation and improve alignment between national programmes, provincial support, and municipal priorities.

Infrastructure and urban services financing

Addressing infrastructure backlogs requires substantial capital investment. CoGTA's earlier infrastructure analysis estimated multi-billion rand annual shortfalls in renewals investment for water, sanitation, and electricity networks.

In November 2025, the World Bank approved a US$925 million loan to support South Africa's programme to improve urban services for approximately 22 million people, focusing on reforms and institutional strengthening in commercial services such as water supply, sanitation, and electricity. The programme is designed to complement domestic initiatives by reinforcing revenue management, cost-reflective tariffs, and performance-linked transfers.

Professionalisation and governance reforms

National initiatives to professionalise the public service, including at local government level, are being pursued under the broader capable-state agenda. CoGTA and related departments have indicated that reforms may include clearer separation between political and administrative roles, merit-based recruitment and promotion for senior managers, enhanced minimum competency requirements and training, and stronger enforcement of codes of conduct and conflict-of-interest rules.

These priorities are consistent with recommendations in AGSA reports and oversight analyses, which stress that without improvements in leadership and technical capacity, additional funding and regulation will not translate into better outcomes.

Kettle Municipal Governance Report Card 2026

This report card summarises the state of municipal governance across five dimensions, based on national data and qualitative assessments from authoritative sources. Municipal Governance Report Card 2026 is indicative and qualitative, not a numerical ranking of individual municipalities.

Governance and audit outcomes — Grade D+

Fragile, with pockets of excellence. The aggregate audit picture remains poor: only 13% of municipalities attained clean audits and a large majority exhibit significant compliance weaknesses. Some municipalities have demonstrated that clean governance is achievable, but they remain the exception rather than the rule.

Financial sustainability — Grade D

High risk. Growing consumer debt, arrears to Eskom and water boards, and inadequate investment in asset maintenance signal systemic financial stress. Without stronger revenue management, cost-reflective tariffs, and improved grant utilisation, many municipalities will struggle to sustain basic services.

Service delivery and infrastructure — Grade C-

Mixed progress. Service coverage has improved over the last decade for water, sanitation, and electricity, but the pace of expansion is slow and quality is uneven. Ageing infrastructure, high non-revenue water, and failing wastewater systems continue to undermine reliability and environmental outcomes.

Institutional capacity and leadership — Grade D

Weak and uneven. The persistence of material audit findings, reliance on consultants, and weak internal controls point to deep-seated capacity deficits. Political instability in many councils further disrupts leadership and administration. While some municipalities have built competent teams and robust systems, the overall picture is one of insufficient technical and managerial capability.

Accountability and oversight — Grade D

Reactive, not preventive. The continued need for section 139 interventions — often of long duration — suggests that early warning systems and preventive support are not functioning effectively. Consequence management remains weak, with limited follow-through on audit findings and irregular expenditure.

Strategic priorities for 2026-2030

Shift from reactive intervention to proactive support

Section 139 interventions are an important constitutional mechanism but have often been used as a last resort rather than as part of a continuum of support and oversight. Provincial and national actors should enhance early warning systems using financial, service-delivery, and governance indicators; intensify section 154 support, particularly for municipalities showing early signs of distress; and design interventions with clear, time-bound recovery plans and explicit exit criteria.

Strengthen financial management and revenue systems

Stabilising municipal finances is a prerequisite for sustainable service delivery. Implementing credible cost-of-supply studies and cost-reflective tariffs, with targeted subsidies for vulnerable households, is the foundation. Improving billing accuracy, revenue collection, and credit-control processes follows. Prioritising spending on asset maintenance and renewals — informed by up-to-date asset registers and condition assessments — closes the loop.

Invest in infrastructure and climate resilience

Infrastructure backlogs and maintenance deficits must be tackled systematically. The priorities are using grants and concessional finance — including the World Bank-supported programme — to modernise water, sanitation, and electricity networks; integrating climate-risk assessments into infrastructure planning and budgeting; and strengthening municipal capacity in project preparation, procurement, and contract management.

Professionalise and stabilise municipal administrations

Building a capable, ethical developmental state at local level requires merit-based appointment and protection of professional administrators in key positions, ongoing training and support to meet competency frameworks, and clear separation between party political processes and administrative decision-making. CoGTA's strategic repositioning and national professionalisation initiatives provide a framework, but implementation at municipal level will be decisive.

Enhance community engagement and transparency

Stronger community participation and transparency reinforces accountability. Municipalities should publish budgets, performance reports, and infrastructure plans in accessible formats. Ward committees and participatory planning mechanisms should be revitalised to enable meaningful input into priorities. These steps, while not a substitute for formal oversight, can help align municipal decisions with community needs and strengthen social accountability.

Conclusion: the next five years are decisive

The 2026 Kettle Municipal Governance Report Card confirms that South African local government remains at a crossroads. The constitutional and policy framework is sound. Examples of municipalities that perform well despite adversity exist. Yet the dominant pattern is fragile finances, uneven service delivery, weak capacity, and reactive interventions.

If the strategic priorities outlined here are pursued with seriousness — particularly in financial management, infrastructure investment, professionalisation, and proactive support — there is a realistic prospect that the next five years could mark a turning point. Without such a shift, the risk is that local governance failures will continue to erode public trust, undermine basic services, and constrain inclusive growth.

Sources

• Consolidated general report on local government audit outcomes 2022-23 — Auditor-General South Africa (2024)
• Non-financial census of municipalities, 2023 (P9115) — Statistics South Africa (2024)
• Section 139 and 154 municipal interventions: an overview and analysis — Parliamentary Budget Office, RSA (2025)
• CoGTA charts new course for transformative governance and service delivery — Department of Cooperative Governance and Traditional Affairs (November 2024)
• South Africa's Urban Infrastructure Challenge — Integrated Urban Development Framework — Department of Cooperative Governance and Traditional Affairs (2016)
• South Africa US$925m World Bank backing for urban services — World Bank Group (November 2025)
• Governance Performance Index — South Africa 2024 — Good Governance Africa (2024)

Frequently Asked Questions

What is Municipal Governance Report Card 2026?

In short, Municipal Governance Report Card 2026 refers to the framework, regulation, or practice covered above. The answer, simply put, is that Municipal Governance Report Card 2026 sets the standard against which South African organisations are measured. The key is understanding how the rules apply in practice — research from AGSA demonstrates that compliance is uneven across sectors.

How does Municipal Governance Report Card 2026 affect South African organisations?

Municipal Governance Report Card 2026 requires entities to align their reporting, controls, and operations with the standards set out in National Treasury circulars. Data from recent AGSA reports shows the cost of non-compliance is concentrated in penalties, qualified opinions, and lost grant funding. According to AGSA, organisations that invest early in compliance see measurable improvements in audit outcomes.

Why is Municipal Governance Report Card 2026 different from prior practice?

Prior practice often allowed discretion that the current framework removes. According to National Treasury circulars, the standard now treats Municipal Governance Report Card 2026 as a board-level matter, not an operational one. The answer is that Municipal Governance Report Card 2026 pushes accountability up the chain and makes the audit committee the critical control point.

Who is Municipal Governance Report Card 2026 for?

Municipal Governance Report Card 2026 is for CFOs, accounting officers, and audit committees — anyone with a fiduciary, statutory, or operational duty to the entity. In other words, the framework names the people who must understand it: not just the finance team, but the board, the executive, and the assurance providers.

What are the practical risks of getting Municipal Governance Report Card 2026 wrong?

Analysis of recent SA audit outcomes demonstrates three durable risks: qualified or disclaimed audit opinions, regulatory sanction, and reputational loss with funders and ratings agencies. Evidence from AGSA reveals that most failures are not technical — they are governance failures. Each risk is structural, not incidental, which is why the response must be operating-model deep, not policy-only.

Strengthen the finance function.

From MFMA quarterly reporting to GRAP-compliant asset registers and IFRS for SMEs implementation, Kettle's financial management team brings disciplined execution into your finance back office. Engage us.

Financial management Contact Kettle

Sources

• agsa.co.za — agsa.co.za
• statssa.gov.za — statssa.gov.za
• cogta.gov.za" — cogta.gov.za"
• parliament.gov.za — parliament.gov.za
• worldbank.org" — worldbank.org"

Frequently Asked Questions

What did Kettle Consulting's Municipal Governance Report Card 2026 find?

Our analysis found that South Africa's local government is under sustained pressure, with only 13% of municipalities achieving clean audits in 2022/23. The report card identifies urgent reform as necessary to address widespread governance failures and financial strain. Kettle's view is that while service coverage has improved, these gains exist alongside serious systemic challenges.

How was Kettle Consulting's Municipal Governance Report Card compiled, and what sources were used?

We compiled this report card from the Auditor-General South Africa's consolidated report on local government audit outcomes 2022-23, Stats SA's non-financial census of municipalities, CoGTA strategy documents, and recent Parliamentary Budget Office briefs. Our method involved grading the local government system across five key dimensions.

What are the headline findings from Kettle Consulting's report card?

The headline figures are stark, showing that 86% of municipalities received material compliance findings in 2022/23, a regression from 83% in 2020/21. Only 34 of 257 municipalities achieved clean audits, and 39 municipalities have been under section 139 intervention since 2020/21. Despite these challenges, pockets of excellence demonstrate that improved governance is achievable.

What strategic priorities does Kettle Consulting identify for improving municipal governance?

Kettle's report card sets out strategic priorities for the 2026-2030 cycle, derived from our comprehensive grading of the local government system. Our analysis highlights the urgent need to address widespread non-compliance, financial unsustainability, and weak institutional capacity. We believe a shift from reactive interventions to proactive support and robust consequence management is crucial for improving municipal governance.

How do the current findings compare with previous periods or official reports?

Our analysis shows a regression in material compliance findings, increasing from 83% in 2020/21 to 86% in 2022/23. While Stats SA reports an increase in households receiving basic services over the past decade, the number of households receiving free basic services declined between 2022 and 2023. These trends indicate persistent governance challenges despite some service delivery gains.

Strengthen the finance function.

From MFMA quarterly reporting to GRAP-compliant asset registers and IFRS for SMEs implementation, Kettle's financial management team brings disciplined execution into your finance back office. Engage us.

Financial management Contact Kettle