A new study has found that municipal performance is a key factor in the success of small businesses and may be a critical limiting factor when it comes to stimulating the growth of local economies.

Many of South Africa's local municipalities grossly underperform in terms of governance, financial management and service delivery. Anecdotes surrounding the dereliction of duty across these key pillars are manifold; from tales of ratepayers' money being splurged on new high-end cars for municipal staff, to scenes of sewage gushing down suburban streets owing to decrepit wastewater infrastructure.

Every financial year the Auditor-General releases a Municipal Finance Management Act (MFMA) report which provides a national audit of municipal performance. And every year the narrative remains largely unchanged as large numbers of local municipalities are given less-than-desirable audit outcomes while only a handful are deemed to be "clean".

Municipalities with clean audits are characterised by sound financial and performance management disciplines and perform their functions in accordance with applicable legislation. Conversely, municipalities with disclaimed audits do not have accounting records to support their financial statements, and typically reflect a culture of little accountability, transparency, performance or integrity. There are four additional categories which indicate varying degrees of oversight and failure.

In her 2021-22 MFMA report which assessed the performance of 166 local municipalities, the Auditor-General found only 18 were worthy of a clean audit. Twelve were given disclaimed audits and 136 demonstrated some...