Can South Africa's municipalities become the next leg of South Africa's reform story? Or will they continue to be a drag on growth and South Africa's risk outlook? Those are the two key questions ahead of the 4 November local government elections.
The answer may be less about which parties make gains at the polls and more about the quality of the coalitions that emerge, and how well the large metros fulfil their mandates. Markets will look for evidence that cities can collect revenue, pay suppliers, protect infrastructure budgets, and maintain stable administrations.
A new multiparty era
South Africa is moving firmly into a multiparty era. The ANC remains the largest party, but its support has weakened from 45.6% in the 2021 local elections to 40.2% in the 2024 national election. Voter turnout further complicates the picture. More than 29 million people are registered for the 2026 poll, but it’s unclear how many will vote, given how turnout at elections has declined over the longer term. This makes mobilisation, rather than registration, one of the biggest success factors for a party.
Coalition negotiations also matter. A party can finish with the most votes and still be unable to build a workable majority. Conversely, a smaller party can gain influence beyond its vote share by deciding who becomes mayor, who controls the budget and whether a coalition survives its first difficult vote.
SA's eight metros house around 40% of the population and carry an outsized share of economic activity, employment and infrastructure. They are where failures in water, electricity, roads and billing become consequential to households and businesses. As such, overall business and consumer confidence in South Africa will be driven by municipal performance in the major metros.
Chart 1: Party performance over the years (national)
South African national elections
Source: Independent Electoral Commission, RMB Research, Investec Investment Management, October 2026
Chart 2: Party performance over the years (local government)
South African local government elections
Source: Independent Electoral Commission, RMB Research, Investec Investment Management, October 2026
A self-reinforcing problem
The pothole is a useful metaphor for how issues at a local government level have national consequences. A pothole looks local, but its economic effects are not, as unreliable roads raise transport costs. Similarly, weak electricity distribution and water supply interruptions reduce the reliability of basic services for households and businesses. National Treasury describes a self-reinforcing cycle in which weak revenue collection creates cash-flow pressure, municipalities delay payments to suppliers and bulk-service providers, and less money is ultimately available for maintenance, refurbishment and improvements. Poor service delivery weakens municipal finances, while weak municipal finances make it harder to improve service delivery.
The latest numbers show how much this problem has grown. At 30 June 2026, consumers owed municipalities R484.5bn, up from R427.7bn a year earlier. Households accounted for R341.3bn, or 70.4% of the total, while businesses owed R107.7bn and organs of state R26.2bn. More importantly, R427.2bn, or 88.2% of total municipal consumer debt had already been outstanding for more than 90 days. In other words, a significant proportion of municipal bills is becoming increasingly difficult to convert into cash. Collections amounted to only 63.9% of billed revenue for the 2025/26 financial year, according to National Treasury.
The stress shows up on the other side of the balance sheet. Municipalities owed creditors R185.2bn as at 30 June 2026, of which R142.4bn, or 76.9%, had been outstanding for more than 90 days. Bulk electricity was the largest creditor category at R99.9bn, followed by trade creditors at R43.1bn and bulk water at R30.5bn. Unpaid municipal bills migrate to elsewhere in the public-sector balance sheet, placing pressure on electricity and water suppliers and, in some cases, on ordinary private sector businesses waiting to be paid.
The deterioration is particularly striking when compared with the municipal numbers from 15 years ago. Municipal consumer debt increased from approximately R64bn in the first quarter of 2011 to R484.5bn by June 2026, while municipal creditors increased from approximately R10bn to R185.2bn.
The immediate constraint however is municipalities' ability to collect what they bill and turn that cash into functioning infrastructure. During 2025/26, municipalities billed R677.8bn in revenue and incurred R587.3bn in operating expenditure. Yet capital expenditure amounted to just R65.3bn against an adjusted budget of R83.9bn, an underspend of R18.6bn. National Treasury says that this poor performance highlights weaknesses in ensuring projects are ready for implementation.
More than half of municipalities are in financial distress, according to National Treasury, whose 2026 policy approach is now moving from oversight to active structural intervention. In July, it targeted 69 municipalities through the Section 216(2) process for problems including unfunded budgets, non-payment of bulk and third-party creditors, unauthorised or irregular expenditure and weak consequence management. Sovereign credit rating agencies have also highlighted the fiscal risk municipalities pose for the state.
Johannesburg – the market's municipal stress test
Johannesburg matters because it is both economically important and politically symbolic. Gauteng (which also includes the key metros of Tshwane and Ekurhuleni) accounts for roughly one-third of national GDP and 47% of national revenue collection. It hosts about 70% of South Africa's business headquarters. Johannesburg is the most visible test of whether national GNU-style cooperation can be translated into local administration.
Yet the city's problems cannot be solved by simply changing the mayor. A genuinely positive result requires political agreement on a funded budget, professional appointments, protection of infrastructure spending, credible revenue collection and a willingness to keep the coalition intact when unpopular decisions are required.
Polls do not tell us who will govern
Polls at a metro level are tricky to follow, with different surveys producing wide gaps. Sample size, margin of error and assumptions about turnout can account for large variances in outcomes.
Turnout is important because local elections reward organisational strength. Investors should therefore use polling ranges to identify coalition possibilities, then ask which combinations are workable.
Chart 3: Where the votes are
Composition of registered voters by urbanisation category 2026
Source: Independent Electoral Commission, RMB Research, Investec Investment Management, October 2026
Chart 4: Turnout rates
National and local election turnout rates 1999 - 2024
Source: Independent Electoral Commission, RMB Research, Investec Investment Management, October 2026
The four metros that matter most
Source: JP Morgan Research, Investec Investment Management, October 2026
The market will draw its strongest signals from Gauteng and KwaZulu-Natal, particularly from Johannesburg, which will likely be a test of cross-party cooperation.
The decisive period may begin only after the votes are counted. Coalition negotiations will determine who controls the executive, the budget and key appointments. They will also determine whether the policy is agreed upon upfront or renegotiated before every council vote.
A broad ANC-DA agreement in key metros would probably be read positively at first because it could reduce the leverage of very small parties and align local governance more closely with the national policy set by the GNU. An ANC-DA coalition in Johannesburg might be the most straightforward route to a comfortable majority, but it does not automatically create capable administration. The coalition would still need a written programme covering budgets, senior appointments, procurement, revenue enforcement and dispute resolution.
The alternative is a coalition built from several smaller parties. Such groupings can be operationally fragile, particularly when support must be renegotiated repeatedly. Small parties may therefore remain influential, especially in a low-turnout election.
From city hall to sovereign
Better municipal governance can boost business confidence, reduce operating costs, support investment and protect the local tax base. Over time, stronger growth and more reliable local infrastructure should support national revenue and reduce the need for fiscal intervention. The reverse is also true: failing cities weaken potential growth, reduce investment and increase the risk that national institutions will have to provide financial or administrative support.
Previous local elections have generated constructive but short-lived market reactions. After the 2016 and 2021 elections, the rand strengthened and selected domestic equity sectors rose over the following week, while 10-year government bond yields rallied by about 30 basis points (bps) on average. Those moves were later overtaken by wider global and domestic factors. The lesson is that only institutional and financial improvement can create a multi-year re-rating.
Likely scenarios
Source: Independent Electoral Commission, Investec Investment Management, October 2026
The post-election scorecard: follow the cash, not the slogans
We should judge the election by measurable operating outcomes rather than by party performance. Can a municipality turn billed revenue into cash, cash into maintenance and maintenance into more reliable services? Here, the key performance indicators include collections and debtors, maintenance and effective capital spending, creditors and bulk accounts, and governance and audit findings.
The second-round political effect
The local elections will also feed into the ANC's December 2027 succession contest. Further losses in Gauteng could weaken leaders whose political bases are tied to the province and affect internal unity.
An ANC setback in the metros may initially be interpreted as reform-positive, but the longer-term consequence depends on how the party responds. A turn towards a centrist unity arrangement would be read differently from a strategy that seeks to rebuild influence through cooperation with more populist parties. Investors should therefore treat the 2026 result as the opening stage of the 2027-2029 political cycle, not a discrete event.
What investors should monitor
Source: Independent Electoral Commission, JP Morgan Research, Investec Investment Management, October 2026
The 2026 local elections are unlikely to fix our cities overnight, but hopefully they can create the governing arrangements needed to do the slow, unglamorous work of municipal repair.
A truly positive story will emerge only if the new councils improve collections, reduce arrears, protect maintenance, execute capital budgets and restore access to funding.
Get Focus insights straight to your inbox