Why Governance and Revenue Management Will Shape the Future of Municipal Infrastructure Funding
South Africa’s municipalities face growing pressure to deliver reliable infrastructure and services while navigating financial strain, ageing infrastructure and rising governance concerns.
Discussions at Enlit Africa 2026 highlighted that the future of municipal infrastructure funding will depend less on the availability of capital and more on whether municipalities can demonstrate financial discipline, governance stability and sustainable revenue management.
Speaking during a panel discussion focused on municipal finance and infrastructure sustainability, Annette van Schalkwyk, Head: Public Sector Lending at Standard Bank South Africa, indicated that improved governance outcomes is one of the most crucial factors influencing municipalities’ ability to access private sector funding and debt markets.
“We continue to see significant challenges around audit outcomes, including disclaimers,” she said. “Once municipalities begin demonstrating improvements in governance, revenue management, collection strategies and audit outcomes, they will have far greater access to the market.”
The discussion reinforced a growing reality across South Africa’s local government landscape: municipalities are increasingly being evaluated on operational credibility, institutional capability and their ability to manage infrastructure sustainably over the long term.
This aligns with broader findings highlighted in the Auditor-General’s latest local government audit outcomes report, which pointed to widespread weaknesses in financial management, project execution, procurement practices and revenue collection across municipalities.
One of the clearest themes emerging from the session was that municipalities cannot focus only on securing new revenue streams while existing revenue systems are inefficient.
According to van Schalkwyk, municipalities must first optimise existing billing and collection systems before pursuing alternative revenue models.
This includes leveraging technologies such as prepaid metering systems, advanced metering infrastructure and improved arrears collection systems to strengthen revenue recovery and reduce non-technical losses.
“Before a municipality introduces new revenue streams, the billing and collection of current revenue streams should be optimised,” she said.
The discussion also unpacked the growing financial impact of non-technical losses, particularly electricity theft, billing inaccuracies and illegal connections.
Distribution losses are generally measured as the difference between electricity units purchased and units sold. While technical losses form part of the normal distribution process, the larger challenge often lies in non-technical losses linked to billing inefficiencies and infrastructure misuse.
Metering inaccuracies, unmonitored properties, illegal connections and weak revenue controls continue to place severe pressure on municipal finances.
“Improved metering, including prepaid meters and meter tampering controls, remains the backbone of loss management,” van Schalkwyk explained.
The panel also explored the evolving municipal borrowing environment in South Africa and the relationship between governance outcomes and lending confidence.
Data presented during the session showed that the majority of municipal borrowings remain concentrated within stronger-performing metropolitan municipalities, while municipalities with cleaner audit outcomes continue attracting greater lending exposure.
Another area receiving growing attention is the review of the White Paper on Local Government, which is exploring alternative funding mechanisms to improve long-term municipal sustainability.
One of the proposals currently under consideration is an origin-based VAT allocation model, although this is under investigation and subject to further policy processes.
The discussion ultimately reinforced that municipal infrastructure finance cannot be separated from governance, institutional capability and operational performance.
As municipalities face increasing infrastructure pressure, energy transition demands and service delivery expectations, the ability to strengthen governance, improve revenue management and build lender confidence will remain central to unlocking sustainable infrastructure investment and long-term economic growth.