Business warns Joburg crisis risks South African recovery

South African business leaders warned that Johannesburg’s deepening fiscal and governance crisis risks undermining the country’s improving economic outlook, calling for urgent action to rebuild the nation’s commercial capital.

The city’s decline has become a national emergency because it accounts for about 16% of gross domestic product and is central to domestic and foreign investment decisions, Business Leadership South Africa (BLSA) said in a statement on Thursday.

Read:
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Its deterioration risks weakening investor confidence just as South Africa’s economic-recovery story gains traction, the lobby group said.

“The situation is urgent and critical,” BLSA said.

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The warning comes after Finance Minister Enoch Godongwana in April threatened to cut crucial state funding to Johannesburg unless the city addresses $1.4 billion of wasteful spending and cancels plans to raise municipal wages by more than $600 million by next year.

State power utility Eskom Holdings has also signaled it may suspend power supplies to the city over unpaid debt.

The crisis in Johannesburg reflects years of accumulated failures across successive administrations, BLSA said.

Capital expenditure has fallen to 6% of the city’s budget, maintenance spending is about 0.5% of asset value, while rates and services charges have more than doubled in real terms over the past 15 years, even as property values have fallen and service quality has deteriorated.

Read:
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The private sector is prepared to work with the city and national government to help stabilise Johannesburg by providing expertise in governance, infrastructure delivery, financial management and anti-corruption measures.

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That offer is contingent on there being “a counterparty capable of governing scrupulously, delivering for the city, and being held to account”, BLSA said.

Such an approach would mirror business’s collaboration with the national government under a partnership founded three years ago in which private-sector support helped the state tackle power shortages, logistics bottlenecks and crime. Such a model would help restore confidence in Johannesburg, the lobby group said.

Read: Eskom’s recovery is real, but R130bn in municipal debt puts it at risk

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