South Africa's municipalities are leaning ever harder on borrowed money, and a growing number can no longer pay back what they owe. That is the picture painted by Statistics South Africa's latest financial census of municipalities, a 20-year review of council finances published ahead of the local government elections on 4 November.
Total municipal liabilities climbed from R402 billion in June 2024 to more than R442 billion a year later, a jump of roughly 10%. The assets those debts help finance grew by only about 5% over the same period, from just under R1.1 trillion to R1.15 trillion. The result is a steadily rising debt ratio: after touching a low of 0.26 in 2011, the proportion of municipal debt to assets has crept up to 0.38 in 2025.
Debt is growing faster than revenue
Municipalities collectively generated R620 billion in revenue in 2025, up from R109 billion in 2006, while operational spending came in close behind at R608 billion. But borrowing is outpacing income growth, and the burden is not evenly spread. North West and Mpumalanga recorded the sharpest surges, with liabilities in each province growing more than 18% in a single year.
Two councils stand out as extreme outliers. Maluti-a-Phofung in the Free State and the West Rand District Municipality carry debt ratios of 2.70 and 2.32 respectively, meaning they owe more than double the value of everything they own.
The country's three biggest spenders, Johannesburg (R79 billion), eThekwini (R60 billion) and Cape Town (R59 billion), together account for a third of all municipal expenditure. The large metros borrow deliberately to fund infrastructure: Johannesburg recently approved a R3.8 billion loan from German development bank KfW to upgrade its electricity network, while Cape Town has raised billions from Nedbank, the International Finance Corporation and the French Development Agency in recent years.
The Auditor-General's warning
The concern is what happens further down the pecking order. In her latest local government audit, the Auditor-General found that 17 municipalities are technically insolvent, with liabilities exceeding their assets. More than half of all councils have current liabilities that outstrip their current assets, and 72% do not have enough cash on hand to pay their creditors.
Despite a legal requirement to pay suppliers within 30 days, 136 municipalities failed to do so, racking up interest and late-payment penalties that add yet more weight to already strained budgets.
With voters heading to the polls in four months, the financial health of the councils that deliver water, electricity and sanitation is likely to feature prominently on the campaign trail.
