National Treasury Takes Aim at Failing Municipal Services - Metro Trading Services Reform
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South Africa's cities are collecting billions in service revenue and spending a fraction of it on the infrastructure that keeps those services running. National Treasury has had enough.
National Treasury officially launched the Metro Trading Services Reform at The Innovation Hub in Pretoria, a reform Treasury describes as one of the most consequential currently underway in South Africa. For accountants and financial professionals who work with municipalities, advise businesses dependent on reliable services, or simply pay a rates bill every month, this deserves close attention.
The Problem in Plain Numbers
The case for reform is stark. Johannesburg's 2025/26 budget projects R11.9 billion in water revenue — yet allocates less than 10% of that to water infrastructure. EThekwini expects to collect R22 billion from electricity charges, with under 5% going back into electricity infrastructure. Revenue goes in. Investment barely trickles back out.
The result is what every South African already knows: water leaks, power outages, and uncollected refuse — and a cycle that actively deters the private investment and bank lending that cities need to grow. As Dr Pieterse stated at the launch: if our cities do not work, South Africa cannot grow.
What the Reform Does
The reform targets water and sanitation, electricity, and solid waste management. Its central mechanism is to ringfence revenues generated by these services and reinvest them back into those services, rather than allowing them to disappear into the general municipal budget. A single unit of management accountability will be created within each metro, effectively requiring trading services to be run as integrated businesses.
Rather than penalising non-compliant metros, Treasury will incentivise performance, mobilising R54 billion in performance-linked grants, with R27.7 billion allocated over the medium term. Metros that meet their own self-determined targets will qualify. The downstream effect, Treasury projects, is over R100 billion in unlocked private investment in urban infrastructure.
The reform also introduces a safeguard: where a municipality cannot spend its infrastructure budget, funds will no longer be redirected elsewhere but transferred to entities like the Development Bank of South Africa to ensure residents in that specific municipality still benefit.
What This Means for Accountants
For CIBA members, the implications are practical. Those working with municipalities will need to understand the new ringfencing requirements and their impact on financial reporting and compliance. The shift toward business-like management of trading services raises the bar on municipal financial accountability and may open new advisory opportunities in the public sector space.
For those advising businesses, particularly SMEs dependent on reliable electricity, water, and waste removal — the reform offers cautious optimism. If it delivers, the improvement in service reliability and the unlocking of infrastructure investment could meaningfully reduce operational costs that South African businesses have been absorbing for years.
Not Privatisation, But a Higher Bar
A question likely to arise is whether this reform amounts to the privatisation of municipal services. The answer, according to Treasury, is no. Municipalities remain responsible for service delivery and retain the authority to decide how services are provided. What changes is the standard of financial management and accountability required to access the incentive funding.
Follow the Money and the Statements
The R54 billion government grant is expected to be matched rand-for-rand by metros' own-source revenues, effectively creating R108 billion in combined investment capacity. Progress will be tracked through annual financial statements that each metro must publish for every trading service, a transparency requirement that gives the public, and financial practitioners, a clear basis for measuring whether the reform is delivering.
Initiative Worth Watching
Success will ultimately depend on execution and whether metros have the political will to follow through on their Performance Improvement Action Plans. What is clear is that National Treasury is no longer willing to simply oversee the problem. This is an active intervention, backed by significant funding, international partnerships from the World Bank, Switzerland, Denmark, Germany, France, and others, and a governance framework that links money to measurable outcomes.
For the accounting and finance community, that shift in approach is itself significant.
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