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The impact of SA's municipal challenges on local economic development

The upcoming local elections put municipal performance under the spotlight. This BER Research Note explores some of the underlying problems that contribute to local government failure and the poor state of service delivery in many municipalities. Without the infrastructure and basic services that municipalities should provide, local economic development is likely to remain constrained. This makes it more difficult to broaden economic participation and reverse South Africa’s unemployment trend.

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After falling to 13 in 2021Q2, the FNB/BER Civil Confidence Index edged higher to 17. The index has been around the 20-point mark since the middle of 2017. The current index level means that the vast majority (more than eighty per cent) of respondents are dissatisfied with prevailing business conditions.

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) recorded a solid increase in November, gaining 3.6 points to 57.2. This was the highest level for the headline PMI since before the COVID-19 third wave and the social unrest shock in July. At 55.4, the average headline PMI reading for October and November is up notably from the 51.5 recorded in 2021Q3. After a very poor third quarter, this bodes well for a recovery in actual manufacturing production in the fourth quarter.

After falling from 50 to 43 in the third quarter, the RMB/BER Business Confidence Index (BCI) remained unchanged in the fourth quarter of 2021. The outcome could easily have been better were it not for a variety of special factors that kept sentiment subdued.

Having slipped from -9 to -13 index points during the second quarter of 2021, the FNB/BER Consumer Confidence Index (CCI) recovered some lost ground to -10 in the third quarter of 2021.