The National Treasury's recently launched Metro Trading Services Reform has been welcomed as a significant step towards improving the financial sustainability of municipalities and restoring essential public services across South Africa.
According to Monei Seleho, Head of the Public Sector Division at Nedbank Business and Commercial Banking, the reforms are aimed at strengthening governance and improving operational performance to ensure municipalities can reliably deliver water, electricity, sanitation and waste management services.
Seleho said the reforms come at a critical time, with many municipalities grappling with declining financial health, ageing infrastructure and deteriorating service delivery.
"Municipalities sit at the centre of South Africa's development agenda. Development does not happen in policy documents alone; it happens in communities," Seleho said.
He noted that access to reliable basic services is fundamental to economic growth, social stability and improving the quality of life for residents.
Despite South Africa having an extensive legislative framework governing municipal finances, including the Municipal Finance Management Act, Municipal Systems Act and Municipal Property Rates Act, Seleho said implementation remains inconsistent.
He identified three persistent challenges affecting municipalities: outdated and fragmented revenue management systems, weak enforcement of credit control measures, and increasing revenue losses linked to poor payment compliance and declining public confidence in municipal services.
According to Seleho, these issues often lead to mounting debt, cash flow shortages, weakened balance sheets and ultimately reduced service delivery.
He stressed that strengthening municipal finances requires disciplined revenue management, effective implementation of financial controls and collaboration between municipalities, financial institutions and communities.
Seleho said banks can play a supporting role by providing funding and modern revenue collection solutions, including digital payment platforms designed to improve collection rates and cash flow.
He also emphasised the importance of restoring a culture of payment among residents and businesses.
"Beyond striving for financial stability, municipalities require a multifaceted approach that focuses on human capital development, improved financial practices, and a stronger commitment to transparent, accountable governance," he said.
He added that leadership stability, operational capacity and technical expertise are equally critical to ensuring municipalities can maintain infrastructure, improve services and regain public trust.
Seleho pointed to the City of uMhlathuze and Midvaal Local Municipality as examples of municipalities that have successfully strengthened their financial position through improved governance and accountability.
Speaking at a recent Nedbank Public Sector Roundtable on municipal financial performance, representatives from the two municipalities outlined measures that helped improve revenue collection, tighten credit control, reduce revenue leakages and promote a stronger culture of payment through disconnections for non-payment and penalties for overdue accounts.
These interventions, Seleho said, have resulted in stronger cash flow, reduced dependence on government grants, healthier financial statements, improved service delivery and greater investment in infrastructure.
Both municipalities have also consistently received clean audits, reflecting sound financial management and governance.
Importantly, he said, improved service delivery and financial discipline have helped rebuild trust between municipalities, households and businesses, encouraging higher levels of payment compliance.
Seleho believes these successes demonstrate that financial sustainability is achievable through strong leadership, institutional discipline and a commitment to delivering quality services.
"As South Africa advances its industrialisation ambitions, the importance of effective local governance cannot be overstated," he said.
He added that municipalities must prioritise sound financial management and governance reforms to break the cycle of financial distress and poor service delivery.
Seleho concluded that financially sustainable municipalities are essential to driving economic growth, inclusive development and improving the quality of life for communities across the country.