AN EXPLORATORY ANALYSIS OF LOCAL

GOVERNMENT FAILURE IN SOUTH AFRICA

A Buthelezi and B Dollery*

Abstract

T his exploratory paper uses public choice theory to assess the

susceptibility of South African municipal councils to government
failure using the taxonomy of local government failure developed by
Dollery and Wallis (2001) and extended by Byrnes and Dollery
(2002). The paper also seeks to expand this typology of local
government failure by including an additional category termed
‘administrative incapacity and forced integration’. Various kinds of
empirical evidence are used to evaluate the performance of South
African municipalities within the confines of the expanded taxonomy.
The evidence seems to show that, in the contemporary South African
institutional milieu at least, municipalities are more prone to
government failure than higher levels of government in terms of ‘voter
apathy’, ‘councillor capture’, ‘iron triangles’, ‘fiscal illusion’, ‘political
entrepreneurship’, and ‘administrative incapacity and forced
integration’. These tentative findings are broadly in line with the
results obtained by Byrnes and Dollery (2002) on local government
failure in the Australian state of New South Wales.

1. Introduction
The historic 1994 election ushered in an era of non-racial democracy into South
Africa that had decisive effects on the governance of the country. It meant inter alia
non-racial elections for local authorities for the first time since Union in 1910.
According to Williams (2001), local government under apartheid was used as an
instrument of racial separation and social control. However, after 1994, local
government became a locus of concrete, visible social change. This required major
constitutional change. Atkinson (2003:1) has argued that South Africa has
experienced two major episodes of transformation at the local government level.
The first episode focused on the political unification of municipalities that had

*
Post-graduate student, Department of Economics, Rhodes University, Grahamstown, South Africa and
Professor of Economics and Director, Centre for Local Government, University of New England,
Armidale, NSW 2351, Australia and 2003 Hobart Houghton Visiting Research Fellow in the
Department of Economics at Rhodes University. Brian Dollery would like to express his gratitude to
Rhodes University for financial assistance in the form of the 2002 Hobart Houghton Visiting Research
Fellowship over the period January/February 2003. The authors would like to express their gratitude to
two anonymous referees for helpful comments on an earlier draft of the paper.
Email: bdollery@metz.une.edu.au

J.STUD.ECON.ECONOMETRICS, 2004, 28(2) 91

previously been racially divided under apartheid. The second episode concerned the
appropriate nature and role of local government under the new dispensation.

Two documents have been especially influential in local government restructuring

in South Africa; the national Constitution and the White Paper on local government
in South Africa. Williams (2001:211) has observed that ‘the constitution mandates
local government to provide democratic and accountable government for local
communities; ensure the provision of services to communities in a sustainable
manner; promote social and economic development; promote a safe and healthy
environment; encourage the involvement of communities and community
organizations in the matters of local government’. The White Paper on local
government was published in 1998 based on an earlier Green Paper written in 1997.
Reddy (1999:208) has argued that ‘the green paper on local government put
forward a developmental vision for local government’, and especially added
emphasis on decentralization. Thus, ‘the White Paper on local government was
used to spell out a vision for a new system that would move beyond the transition
phase and focus on transformation; thus a vision for developmental local
government is proposed in the White Paper’ (Reddy, 1999:209). In South Africa
local government is regarded as a ‘sphere’ of government rather a ‘tier’ of
government. This nomenclature was especially adopted to remove the implications
of a hierarchical structure of government where a lower tier is inferior to the higher
one. In essence, ‘local government is an autonomous and people-oriented tier of
government’ (De Beer and Lourens, 1995:3).

A considerable body of thought, derived largely from public choice theory, has
focussed on the phenomenon of government failure, including local government
failure. Government failure can be defined as the inability of a government agency
or agencies to achieve their intended outcomes. Various taxonomic systems of
government failure have been developed, almost all of which deal with provincial
and central government (see, for instance, Dollery and Wallis (2001)).
Nevertheless, economists have also constructed at least three typologies of local
government failure. British scholars Bailey (1999) and Boyne (1998) have both
advanced taxonomies of local government failure premised on the view that the
problem of government failure is less acute at the local government level compared
to central and state governments. By contrast, in the construction of their typology,
Dollery and Wallis (2001) have argued that the phenomenon of government failure
is likely to be more widespread in local governance.

In essence, this dispute in the embryonic theoretical literature on local government

failure can only be resolved by resort to empirical evidence. At present, Byrnes and
Dollery (2002) represents the only attempt to test an expanded version of the
Dollery and Wallis (2001) taxonomy against evidence drawn from the municipal
system of the Australian state of New South Wales. The present paper seeks to
augment this rudimentary empirical literature on local government failure by
modifying the Dollery and Wallis (2001) and Byrnes and Dollery (2002) typologies
and applying them to contemporary local governance in South Africa.

92 J.STUD.ECON.ECONOMETRICS, 2004, 28(2)

It should immediately be stressed that not all social scientists, including
economists, feel that the public choice approach, with its extension of the homo
economicus assumption to most realms of human behaviour, provides an
appropriate vehicle for the analysis of real-world phenomena, including local
governance. Reservations have been expressed by a large number of commentators.
For instance, Hugh Stretton and Lionel Orchard (1994) devote almost all of their
Public Goods, Public Enterprise, Public Choice to any assault on public choice
theory and practice. Similarly, Peter Self (1993) provided an excellent summary of
the main arguments against the public choice approach in his Government by the
Market? The Politics of Public Choice. However, we find the counter arguments
presented by leading public choice scholars, like Mueller (2003), very persuasive.

The tentative and exploratory nature of this paper should be stressed at the outset to
qualify the provisional conclusions drawn from the paper. In particular, published
empirical evidence on the performance of South African municipalities is
unfortunately largely unavailable. Moreover, although some specific council’s have
developed their own performance indicators, official performance measurement and
the official compilation and publication of performance indexes are lacking. Apart
from the time-intensive and resource-intensive application of batteries of
performance indicators by researchers themselves, which was not feasible in our
circumstances, academic investigators are perforce obliged to rely on the fragments
of information publically available through the media and other sources. This
inevitably means inter alia that the information used takes on an anecdotal and
selective appearance and the conclusions derived from the analysis are tentative
rather than definitive.

The paper itself is divided into three main sections. Section 2 seeks to provide a
synoptic review of the taxonomic literature on local government failure. Section 3
examines an expanded version the Dollery and Wallis (2001) and Byrnes and
Dollery (2002) typology in the light of current trends in South African municipal
governance. The paper ends with some brief concluding remarks in Section 4.

2. Local government failure

Government failure can be generically defined as the inability of a public agency
(or agencies) in a given tier (or sphere in the case of South Africa) of government
in a federal system of multi-tiered government to intervene optimally in a market
economy to achieve allocative and productive efficiency. Various taxonomies of
government failure have been developed. Although the notion of government
failure extends at least as far back as Adam Smith, possibly the earliest
contemporary typology of government failure was developed by O’Dowd
(1978:360) who argued that there are three types of government failure; ‘inherent
impossibilities’, ‘political failures’ and ‘bureaucratic failure’. By contrast, Dollery
and Wallis (1997) developed a more recent taxonomy of local government failure
in which they identified three main forms of government failure; legislative failure,
bureaucratic failure, and rent seeking. However, the most comprehensive modern
typology was advanced by Weisbrod (1978) in a fourfold classification that
embraced legislative failure, administrative failure, judicial failure and enforcement

J.STUD.ECON.ECONOMETRICS, 2004, 28(2) 93

failure. In his classic text Markets or Governments (1989), Charles Wolf also made
a significant contribution to this taxonomic literature with his theory of ‘non-market
failure’.

In contrast to these generic taxonomies of government failure, Dollery and Wallis

(2001) developed a typology of local government failure, which was later extended
by Byrnes and Dollery (2002). Byrnes and Dollery (2002) argued that government
failure is stronger at local level than it is the case with other spheres of government.
They cited five main factors underpinning the case for more acute government
failure at the local level; voter apathy, asymmetric information and councillor
capture, iron triangles, fiscal illusion, and political entrepreneurship. We shall
briefly review each of these factors in turn:

2.1 Voter apathy

Public choice theory holds that, in general, voting by citizens in political elections
is an irrational activity since the voting process is costly whereas the benefits
associated with voting are negligible. After all, the act of voting involves various
expenses in terms of both time and money while the vote of a single individual has
virtually no effect on the outcome of elections (Aldrich, 1997). Five reasons seem
to contribute to higher voter apathy at the local level (Dollery and Wallis, 2001).
Firstly, in many local government systems, voters do not perceive periodic
municipal elections as politically significant events because the behaviour of local
governments is severely constrained and manipulated by state and national
governments. Secondly, even where local government elections occur along
political party lines, with the associated informational benefits for voters, many
candidates do not have a party affiliation or party affiliations may in any event be
much weaker than at the state or national levels of government. Thirdly, local
government elections often do not get adequate coverage from the media. Fourthly,
‘because of their lower public profiles and complicated interface, governance and
management roles are often confused in the eyes of many citizens, who cannot
readily distinguish between elected representatives and professional public
servants, making it difficult to assign responsibility for previous policy outcomes’
(Dollery and Wallis, 2001:57). Finally, it is comparatively difficult to establish
accountability in local governance.

2.2 Asymmetric information and councillor capture

This problem arises from the existence of principal agent relationships between
bureaucrats and politicians, and between politicians and voters. Dollery and Wallis
(2001) identified four factors based on agency theory and economic theory of
bureaucracy that may contribute to the emergence of an agency problem. Firstly
‘since the hands-on nature of their jobs means managers are bound to be much
better informed than councillors, it seems likely that by manipulating the
asymmetry of information to their advantage, managers can capture councillors and
thereby achieve the policy outcomes they desire’ (Dollery and Wallis, 2001:61).
Secondly, unlike state and central government politicians, local government
representatives generally do not have access to political advisers, who may assist in

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filtering information received from professional managers. Thirdly, difficulties
arise from ‘agenda control’ exercised by well-informed bureaucrats. Finally,
selective behaviour can affect municipal outcomes. Wintrobe (1997:251) described
selective efficiency as a means by which ‘bureaucrats control their master’s choices
by being efficient at the things they want to do, and inefficient at those they do not’.

2.3 Iron triangles

Derived from the public choice theory of rent seeking, the theory of iron triangles
refers to the formation of tripartite colluding associations (or ‘triangles’) that seek
to influence the share of a municipalities budget devoted to particular local
government programs. Byrnes and Dollery (2002)) identified three factors that
suggest that the problem of ‘iron triangles’ will be felt more acutely at the local
government level. In the first place, due to acute asymmetry of information at this
level between managers and their typically part-time political councillors, plus the
tendency for local governments to rely upon standing committees to oversee their
operations, interest groups can readily identify politicians with powers over certain
municipal functions and form alliances with them. Secondly, since a relatively high
percentage of tax revenues are fixed and do not vary much with the consumption of
local public services, interest groups have an incentive to attempt the redistribution
of service provision in their favour. Thirdly, owing to the horizontally-fragmented
nature of local governments, iron triangles might be expected to have a more
significant impact on policy making, since small local government will attract less
media and voter scrutiny.

2.4 Fiscal illusion

Fiscal illusion refers to the possibility that the costs and benefits of government
may be consistently misconstrued by the citizenry of a given fiscal jurisdiction. Of
the five generic forms of fiscal illusion that have been identified by economists,
two may apply especially strongly to local government - the fly-paper effect and
renter illusion. The flypaper effect describes the hypothesized tendency for
categorical lump-sum grants from federal to state and local governments to increase
public expenditure by more than an equivalent increase in income from other
sources. It would seem that voters misperceive intergovernmental grants as ‘gifts’
to their jurisdictions and overlook the fact that their tax liability rises
correspondingly at a higher level of government. By contrast, renter illusion relies
on the assumption that since the primary revenue of local government is derived
from property taxes, only those who own property and are thus directly levied will
correctly estimate the tax-price of local public goods. Since local government is
heavily dependent upon rates, it is far more susceptible to this form of fiscal
illusion.

2.5 Political entrepreneurship

The argument here is that the inefficient use of resources by political entrepreneurs
to capture the attention of voters may lead to systematic allocative inefficiencies in
local government (Byrnes and Dollery, 2002). Thus, ‘councils can be conceived of

J.STUD.ECON.ECONOMETRICS, 2004, 28(2) 95

as breeding grounds for political entrepreneurs to not only capture the attention of
political party officials at higher levels of government, but also of prospective
voters in federal and state seats’ (Byrnes and Dollery, 2002: 57). Three factors may
explain the greater magnitude of political entrepreneurship at the local government
level. Firstly, since local government is typically the lowest level of government in
a federation, with a large number of elected representatives, the proportion of
political entrepreneurship is likely to be higher at this level than any other.
Secondly, due to the high degree of voter apathy and comparative lack of interest
by the media in local government, an ambitious municipal politician will embark on
expensive eye-catching projects to become known by voters. Finally, since national
and provincial jurisdictions are typically larger in area and population than local
government wards, political entrepreneurs may need to provide public goods that
have a benefit region much larger than that of the local government they represent.

3 South African empirical evidence

3.1 Voter apathy

South Africa has a long and tortuous history on the question of the democratic
franchise that may colour the views of the majority voters and thus reduce the
degree of voter apathy in comparison to other democratic countries. However,
evidence before the transition from apartheid appears to support the argument that
voter apathy is stronger in municipal elections than it is in corresponding provincial
and national elections. This is in line with international experience elsewhere
(Mueller, 2003).

For instance, Floyd (1952:144) has observed that, in general, the greatest interest is
taken in national parliamentary elections; a very high percentage of voters
sometimes record their votes. A summary of the percentage of votes in national,
provincial and municipal elections was recorded by Floyd (1952:144) as 60 to 80
per cent, 40 to 60 per cent, and 25 to 40 per cent respectively. Despite the fact that
Floyd’s research was conducted in the early 1950s, the essential point is that there
is a great apathy in municipal elections as compared to provincial and national
elections and that this trend still persists. For example, data provided by the
Independent Electoral Commission (http://www.elections.org.za) on the 1994
provincial elections and 1995 municipal elections shows that both the proportion of
registered voters and the number of votes cast was far higher in the provincial
election.

Further evidence pointing to the explanatory significance of voter apathy may be

derived from Ndaba (2000) who argued that ‘at the close of voter registration on 31
March 2000 for the purposes of municipal demarcation 18.3 million South Africans
appeared on the voters roll. This figure falls short by approximately 4 million from
the estimated total voting population in South Africa’ (Ndala, 2000). 4 million
represents around 18 per cent of the total electorate and provides at least some
quantitative indication of the degree of voter apathy at the local government level in
contemporary South Africa.

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An additional factor that contributes to low voter turnout in South African
municipal elections is that media reporting on local government elections is less
much comprehensive than for provincial and national elections. In his analysis of
the media reporting of municipal elections in Mafikeng in 2000, McGhee (2000:4)
argued that by September 2000 political parties had not yet started campaigning
and therefore there were few political issues worthy of comment. He further argued
that the arrangements for local governance are complex, and had not been
adequately communicated to the electorate. It would thus seem that even political
parties themselves do not stake great importance on municipal elections and this, in
turn, is reflected in less media reporting, poor voter exposure and ultimately poor
voter turnout.

In the aftermath of World War Two, Floyd (1952:145) argued that the primary
cause of voter apathy in municipal elections lay in the electoral system itself and
the overwhelming dominance of a single party. This may still be the case. For
instance, the ANC currently holds the majority of the seats in 284 municipalities,
except in the Western Cape, where the majority party is the NNP, and in KwaZulu
Natal, where the majority party is the IFP. Accordingly, in local government
elections there is little real contest between the political parties. More generally, it
seems that the underlying problem with municipal democracy in South Africa, both
now and in the past, is that since ‘change of local councillors makes little difference
to the functioning of the local government machine, voters give up in disgust’
(Floyd, 1952:145).

In South Africa literacy plays a key role in explaining voter apathy levels at local
government level. For example, Bekker (1996:22) argued that a large number of
inhabitants of towns and cities are not educationally, politically or economically at
an acceptable level that is conducive to democratic local governance. He further
contended that there is high proportion of illiterate or poorly-educated inhabitants
who are politically naïve. This means that these citizens will find it difficult to
make informed judgments about the conduct of local governments. While this is a
problem for all tiers of government in South Africa, it bears deeper significance for
local government because of the neglected nature of local government.

3.2 Asymmetric information and councillor capture

Dollery and Wallis (2001) argued that since municipal councillors typically hold
part-time positions and managers enjoy full-time employment, it is often difficult
for councillors to master the complex detail of the office they hold. In South Africa
councillors are elected to office for 5 years whereas municipal managers are
employed on a contractual basis. Moreover, South Africa has for certain
municipalities adopted the executive mayoral system. According to Hollands
(2001:1), executive-type municipalities are part of a general trend towards
centralisation of power and decision-making within local government. They are
ostensibly motivated by concerns for greater efficiency, an equitable distribution of
resources and direct accountability. However, ‘disputes around the executive mayor
system and the composition of mayoral committees have been portrayed in the
media as principally about party political wrangling’ (Hollands, 2001:1).

J.STUD.ECON.ECONOMETRICS, 2004, 28(2) 97

The functions of the executive mayor are set in Section 56 of the Municipal
Structures Act. In essence, ‘these are broad ranging and relate to identifying the
need of municipality, prioritising these needs, recommending service delivery
strategies and operational approaches, managing performance within the
municipality, administrative management and reporting to council. Unless properly
managed, these functions overlap heavily with the responsibilities of the municipal
manager and could lead to tensions and blurred lines of accountability’ (Local
Government Transformer, 2001:2). Given the possibility that responsibilities may
overlap, it can be argued that due to asymmetric information favouring the
professional managers, it is possible that managers may nevertheless pursue their
own objectives.

The principal-agent relationship between councillors and voters is further reflected

in the fact that ‘the public has been fed a line that less debate and faster delivery
will flow from the model and that this will somehow promote local democracy’
(Hollands, 2001:2). As desirable as they might be in streamlining decision-making
and ensuring faster service delivery, Hollands (2001) argued that these do not
necessarily equate with a deepening of democracy in local government nor does the
use of like-minded politicians (especially in the form of mayoral committees)
improve the quality of the decisions taken.

Public choice theory holds that another reason for the asymmetric problem at the
local government level arises from the fact that councillors do not have access to
political advisors. Mxube (2003) contends that the mayoral committee chosen by
the mayor tends to an advisory body to the mayor. The problem, however, arises in
that ‘some executive mayors have opted to exclude opposition parties from these
committees’ (Local Government Transformer, 2001:3), thus failing to take into
account interests of groups other than the majority party. This could be an acute
problem in municipalities where there is a close contest between the political
parties. For instance, ‘mayoral committees have typically chosen to convene behind
closed doors thus excluding both the public, community representatives, the press
and opposition parties from discussion and decision making on key municipal
functions’ (Local Government Transformer, 2001:3). This obviously goes against
the prescriptions of local government democracy, which notionally lends
importance to citizen participation. Furthermore, given the fact that two of the six
criteria of measuring good governance are the extent of ‘communication with
residents’ and ‘basic democracy and accountability’, it seems puzzling to exclude
the public and potentially override their interests.

3.3 Iron triangles

Iron triangles are probably the most difficult manifestation of local government
failure to document because of their complex nature and often criminal character,
and especially because at least one of the colluding parties is usually a government
official who may be able to hide any information that is incriminating or may raise
suspicion concerning his behaviour.

98 J.STUD.ECON.ECONOMETRICS, 2004, 28(2)

In South Africa, the Office of the Public Protector (OPP) exists to monitor fairness
in public administration and to ensure clean and efficient governance. From their
data it is possible to find examples of evidence of iron triangles that have been
uncovered by the OPP. For instance, a given municipality bought a piece of land
for R25 000. There followed a dispute between the council and the Ratepayers’
Association regarding the purchase price and lack of proper evaluation of this land.
The sale was suspended and the council deposited the money in a building society,
which was party to this transaction. Council could not account for the interest
accrued by this money. Similarly, municipalities countrywide award low-cost
housing tenders to developers who often lack the requisite building skills. This is
typically done under the auspices of black empowerment but, at the end of the day,
these houses are sometimes below standard and may eventually became
uninhabitable (Local Government Transformer, 1999:8). Along analogous lines, the
Standing Committee on Public Accounts investigated the Indwe Transitional
Council (in the Eastern Cape) and learned that serious irregularities had taken place
regarding payments made to and on behalf of contractors. In one case,
overpayments amounting to R306 483 were made which had, at the time of the
hearing, still not been recovered from the contractor and the previous Town Clerk.
These two had apparently conspired to defraud the Indwe Council. In light of these
findings, the Committee recommended that the MEC establish a task team to
investigate the matter with the view of disposing of the issues. Action would
include recoveries and/or criminal charges against those involved (Report of the
Standing Committee on Public Accounts, 2001)

3.4 Fiscal illusion

Dollery and Wallis (2001) postulated that two main forms of fiscal illusion that are
especially important at the local government level; the ‘fly- paper effect’ and
‘renter illusion’. The fly-paper effect refers to the hypothesised tendency for
categorical lump-sum grants from national to provincial or local governments to
increase public expenditure by more than an equivalent increase in income from
other sources. Evidence for the fly-paper effect may be garnered from the fact that
‘in the past some local authorities used inter-governmental grants to pay councillor
allowances above approved rates, to increased the number of staff employed and to
pay off overdrafts that are a direct result of the non-payment of service charges by
the community’ (Local Government Transformer, 1996:3). In a separate case the
MEC for local government in Gauteng decided to transfer a percentage of its inter-
governmental grants to Bloemfontein; this raised questions of whether equitable
grant allocations depend on the personal generosity of an MEC (Local Government
Transformer, 1997:2).

Renter illusion is a form of fiscal illusion that is based on the assumption that since
the primary source of local government revenue is derived from property taxes,
only those voters who own property and are thus directly levied will correctly
estimate the tax-price of local public goods. It follows then that since higher levels
of government are much less reliant upon property taxes, local government is far
more susceptible to this form of fiscal illusion. Evidence of renter illusion is seen
inter alia in the collection and use of property taxes by the municipalities.

J.STUD.ECON.ECONOMETRICS, 2004, 28(2) 99

According to the Local Government Transformer (1999/2000:4), rates are the
single most important source of discretionary income for local government. For
instance, it has been observed that ‘local government collects 90% per cent of its
financial needs for operating expenditure. The 1996/97 statistics show that local
government spent R50 billion and it raised R45 billion, implying inter alia a
relatively low level of vertical fiscal imbalance. But this is an aggregate picture that
hides complexities of differing taxes between urban and rural areas, metros and
small towns’ (Local Government Transformer, 1999:1).

The essence of the renter illusion argument in the milieu of South African local
government resides in the fact that, while rates constitute a substantial proportion of
municipal revenue typically paid by a relatively small number of council voters in a
given municipal jurisdiction, the great majority of council voters do not own
property and thus do not contribute towards municipal revenues through property
taxes. These non-contributory voters can thus elect representatives who run on high
spending platforms in the full knowledge that the costs of these programs will be
born by a minority of rate paying voters. Fiscal illusion in this context means that
the costs of expensive council projects do not fall on the majority of voters.
Because most urban South African families are not property owners, renter illusion
is likely to be a pervasive factor in the fiscal affairs of many South African
municipalities. In his Markets or Governments, Charles Wolf (1988) described this
kind of economic phenomena as a form of ‘microdecoupling’, where a majority
exploits a minority through fiscal redistribution in the political system.

3.5 Political entrepreneurship

Unique to South Africa is the fact that ‘in the past the community was not involved
in local government’ (Coetzee, 1995: 6). In the New South Africa, and as the
country moves beyond past apartheid institutions, local government is bound to
become an important breeding ground for political entrepreneurs. Currently the
ruling ANC is appointing well-known ‘freedom fighters’ as candidates for local
government elections. For instance, Zali and Joe Madonsela were on the ANC's
election list in Wesselton township in Ermelo. Madonsela was introduced to
politics in 1987 when he joined the United Democratic Front (UDF). His wife Zali
became involved in politics when she was a training nurse at Baragwanath hospital.
Similarly, Thembi Khumalo, an ANC candidate in Balfour in Mpumalanga, was
one of the 20,000 women who marched to the Union Buildings in Pretoria on 9
August 1956 to protest the extension of the pass law to women. These are just a few
examples of the ruling party candidates with a history of opposition to apartheid
who ended up holding elected seats in local government.

Political entrepreneurship in South Africa is thus most unusual. Perhaps the

important point is that currently in South Africa it is the people who fought in the
struggle against apartheid who are moving up the ranks to local government; no
doubt with further and higher political ambitions in mind However, in the New
South Africa human rights are now realised, at least in principle, and local
government holds a mandate to serve the basic needs of both urban and rural
communities.

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Accordingly, the problem of endorsing municipal candidates on the basis of
previous experience in the struggle against apartheid is that although this may
enhance their prospects of electoral success, they may nevertheless lack the
requisite capacity to operate along formal government lines. Success as a councillor
typically requires certain specific educational and other skills that that these
candidates may not possess.

3.6 Administrative incapacity and forced intergration

Administrative capacity in local government refers to the ability of the professional

bureaucracy employed by municipalities to carry out the intended business of
councils. Conversely, administrative incapacity, sometimes also termed
bureaucratic failure, refers to the inability of a local government to conduct its
assigned activities in an efficient or equitable manner.

Forced integration, formerly known as amalgamation in South Africa, refers to the

compulsory merging of previously independent municipalities into a larger whole,
with or without their consent. The extent of forced amalgamations in South Africa
over the recent past is reflected in the reduced number of municipalities from 843
to 284.

This paper is premised on the assumption that amalgamation and administrative

capacity bear a close causal relation in the contemporary South African milieu. It is
thus appropriate to examine both concepts in greater detail. Accordingly, we
address amalgamation and its challenges in the first place and then proceed to
discuss the related question of administrative capacity.

3.6 Challenges of amalgamation

Three substantive issues have plagued the amalgamation process in South Africa.
In the first place, Atkinson (2001:2) has observed that ‘after the local government
elections of December 2000, the newly demarcated municipalities had to
amalgamate the erstwhile transitional local council and transitional rural councils
into single administrations covering far larger areas’. Amalgamation thus meant
that significant additional responsibilities were placed on the newly created
municipalities. This may have increased job depth and job range to such a degree
that even those municipal employees with requisite skills and capacity to
adequately perform their job descriptions were incapacitated by the additional
complexities in their huge additional workload. Atkinson (2001:2) contends that it
seems fair to argue that decision-makers have radically underestimated the sheer
scale of the administrative integration process required by the new demarcations; it
has proved to be far more time consuming, complex, and difficult than originally
envisaged. Along similar lines, Lucas (2003) has argued that the challenge posed
by amalgamation lay in the fact that rural municipalities struggled with the
problems of post-apartheid amalgamation, and, as a result, they failed to focus on
‘developmental’ strategies and instead tended to deal largely with ‘crisis
management’.

J.STUD.ECON.ECONOMETRICS, 2004, 28(2) 101

Secondly, Atkinson (2001:3) argued that amalgamation faltered due to the practical
difficulty of integrating very different administrative systems. She provides the
example of staff with different task descriptions, who receive different levels of
remuneration, and who have nonetheless had to be integrated into a common
organisation. Atkinson’s empirical research has demonstrated that amalgamation
has drastically increased the size of municipalities. Thus, the ‘Xhariep district
municipality in the southern Free State is the size of Hungary; the Northern free
State district municipality has the same diameter as Belgium; and the Namakwa
district municipality is as almost as wide as Kansas’ (Atkinson, 2001:3).

Finally, amalgamation has led to financial problems. Although poor financial

management is a common public sector problem, its effects are also strongly felt at
the local government sphere. Bernstein and Clynic (2000) argued that elected
councillors will need political will to support improved credit control, debt
collection, and especially the privatisation and ‘outsourcing’ of municipal services:
Nearly 90% of local authorities are not involved in any partnerships with the
private sector and most are failing to run on what can be described as appropriate
‘business lines’. Moreover, even where attempts have been made to involve the
private sector there have not been significant improvements. Atkinson (2001:4)
contends that in some of the cases where the private sector has been involved,
consultants have reconciled a municipality’s bank account month after month, but
have not taught a single municipal official to perform this task. Reddy (1999:201)
argued that a compounding factor to the financial problem is that, after apartheid,
the majority of local authorities did not have adequate revenue bases.

3.7 Administrative incapacity

Municipal incapacity is closely related to the process of amalgamation. Atkinson

(2001:4) observed that the local elections of December 2000 were a radical new
experience, essentially because they were based on the new municipal demarcations
and because the protected white, Indian and coloured franchises fell away.
Atkinson (2001:5-7) advanced the following factors as playing a critical role in
worsening the problem of local government incapacity in South Africa:

• In the first instance, many councillors have been elected for the first time; thus
little experience of formal local government has been carried over from the
period before December 2000. She further argued that even where previous
councils have been re-elected, the political dynamics have changed massively,
and therefore much of their experience has not been used. In other words,
democracy has deemed their knowledge obsolete and thus they have had to
‘unlearn’ the methods of the former apartheid government and learn the
prescriptions of new democratic local government dispensation.

• New staff appointments have become the order of the day. Many of these new
appointments have been justified in favour of affirmative action. Promoting the
equity objectives of affirmative action may not be wrong in itself. However,
effective promotion of these objectives should be pursued so as to ensure
fairness at no cost to effectiveness and efficiency, as the Constitution demands.

102 J.STUD.ECON.ECONOMETRICS, 2004, 28(2)

 Horner (2003) argued that the problem is that transformation is ‘top-down’ and
not ‘down-up’.

• The rise of political patronage from the majority party. Patronage politics has
led to the appointment of the ‘favourite sons’ of dominant political parties,
often with very poor qualifications or experience. Competence to perform
municipal functions has often been a secondary consideration, if it has been
taken into account at all.

• According to Atkinson (2001:3) financial incapacity alone has resulted in

nearly 80 per cent of municipalities missing their financial reporting deadline
in 1999/2000, and 5 per cent of the municipalities had still not submitted
financial statements a year after the due date.

4. Conclusion
The intended aim of this paper was to expand the Dollery, Wallis (2001) and
Byrnes and Dollery (2002) taxonomies of local government failure and to evaluate
the extended model against available empirical evidence in the case of South
African local government. More specifically, a new taxonomic category was
included in the form of ‘administrative incapacity and forced integration’ to better
account for the performance of contemporary councils in the New South Africa. In
essence, this typological term is derived from the observed the lack of necessary
human resources in South African local governance to perform its mandated
functions; it helps to explain the massive growth in the number of municipalities
that can aptly be described as ‘destructive’ rather than ‘constructive’.

Empirical evidence gathered in this evaluative exercise regarding the extant

taxonomic categories ‘voter apathy’, ‘asymmetric information’, ‘iron triangles’, and
‘fiscal illusion’ seems to broadly replicate the findings of Byrnes and Dollery
(2002) in their Australian case study, with the sole exception of ‘political
entrepreneurship’. Moreover, South African municipal behaviour over the recent
past appears to support the postulated hypothesis that local governments are indeed
more susceptible to the generic phenomenon of government failure.

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