As we head for what promises to be heated and potentially conflict-ridden local government elections in 2011, Buffalo City municipality faces two additional challenges that could further complicate municipal governance in the city. Firstly there is the matter of on-going political and institutional instability in the city. In January 2011 MEC for Local Government and Traditional Affairs Mlibo Qoboshiyane described Buffalo City as “on the brink of collapse” and attributed this to “in-fighting” and poor supply chain management. Secondly there is the question of whether the city is ready for metropolitan status in 2011.

The first challenge is one of restoring basic governance to the city. After five years of political and administrative instability the city needs to tackle two key governance issues: a) normalising council and bringing some order to its deliberations and b) stabilizing the administration by reconstituting a
professional and effective management with the skills and motivation to get key line functions operating again. In the short term this also includes resuscitating a credible supply chain management system without causing undue delays in key service and infrastructure contracts. To re-build public confidence the city also needs to urgently finalise outstanding fraud and corruption cases.

The metropolitan issue is a more deep-seated question about the economic fundamentals of the city; however these questions could be overlooked given the more pressing problems confronting the council. In 2008, the Municipal Demarcation Board confirmed that Buffalo City would become a metro in 2011 after the elections. Given the state of local governance in BCM, citizens may be excused for delaying the celebrations. Unfortunately the BCM public may find that performance has little bearing on the decision to award metro status.

While there may be nothing in a strictly legal sense that prevents the city from graduating from a poorly performing local municipality (Category B 1)
to a metropolitan municipality (Category A), this “progression” understandably seems incongruous to many. How did the second largest city in the
province arrive at this apparently irrational crossroads?

When the Minister for Local Government decides on conferring metro status he is not obliged to consider these rather glaring issues. Section 2 of the Municipal Structures Act simply calls for attention to whether the area:
• Has a high population density.
• Has an intense movement of people, goods and services.
• Has extensive development: and multiple business districts /industrial areas.
• Has a centre of economic activity with a complex and diverse economy.
• Constitutes a single area for which integrated development planning is desirable.
• Has strong interdependent social and economic linkages between its constituent units.

Allowing that these criteria make no call for an assessment of the institutional, political and financial capability of the aspirant metro, it nonetheless
remains arguable whether BCM satisfies all or most of these criteria.

Does Buffalo City really fit the economic and financial profile of a metropolitan municipality? In 2003/2004 when the metro discussion began to peak, BCM had a total budget of slightly over R1,5 billion a fraction of the average budget of about R8,4bn in the 6 existing metropolitan municipalities. According to the reports of the Demarcation Board in 2003, BCM had a rates base of slightly over R155m - the average for other metropolitan municipalities was nearly R2bn.
The aggregated total expenditure for BCM for 2010/2011 of around R4,5 bn is still way short of metro norms and nearly R508m is made up of transfers from national government. Buffalo City’s capital budget is a relatively small portion of its total budget, suggesting that infrastructure development has not kept pace with its metro spirations - furthermore the capital budget tends to be under spent. As the Auditor General noted, “The capital budget for the 2008-09 financial year was under-spent by an amount of R318 million (46%). The under spending of capital grants is linked to the failure to implement the municipality’s supply chain management policy.”

In 2006 the City Development Strategy cautioned, “BCM has become a city where most people worked in the manufacturing sector in the past and are now increasingly becoming dependent on government sector employment growth.” Government, therefore, rather than the private sector, is the major prop to the BCM economy. A key feature of metro cities is their capacity to provide jobs. In 2003 BCM had the highest unemployment rate in comparison to both aspirant metros and established metros since then any growth in employment has been largely in the public sector. The City Development Strategy noted, “The acid test for a regional economy is its ability to provide sufficient and sustainable employment. With unemployment between 55% and 60% the Buffalo City region clearly does not generate sufficient work opportunity.”

A few tangible initiatives offer hope that the City Development Strategy for BCM is not dead: the refurbishment of the airport, the growing status of the city as a sports precinct, at least three significant private investor commitments at the IDZ and the continued commitment of Mercedes Benz in producing its third generation of C class vehicles in East London. These are glimmers of hope - but do not constitute a metro economy per se.

The fact of the matter is that, not just Buffalo City but the entire aspirant Metros (Msunduzi, Mangaung, Mbombela, Polokwane, Rustenberg, Mogale City) lag hugely behind the established metros. The Gross Value Added (a measure of the value of goods and services produced in an area) per capita in the metro municipalities is nearly double that added by the aspirant metro municipalities.


Not only is BCM heavily dependent on transfers from the treasury (Equitable Share transfers), it also does not account for the use of such funds in a manner that satisfies the Auditor General. Qualified audit opinions in the period 2006 - 2008 declined further to a more serious audit disclaimer for the 2008/2009 financial year. Can additional functions and associated funding be responsibly assigned to BCM whilst it is in this state?

So what underpins the motivation for BCM to become a metro? Business and other players supported the idea in 2003 because it was seen to increase investor confidence. Gaining functions like environmental health services undoubtedly adds to the status of the municipality but could equally become a liability for a demonstrably unstable administration. Another factor that might fuel metro aspirations is the level of remuneration that councilors will become eligible for.

Moving from local to metro status means a grade 6 classification for the city and the possibility for a significantly higher upper limit to councillor remuneration packages. Currently the upper limit for the full remuneration package of a full-time mayor or executive mayor in a grade 6 municipality is R964,255. These packages will not come from a significantly larger pot - with the abolition of the old RSC levies metros do not gain access to any new revenue source. Part of the Equitable Share transfer that previously went to the district to compensate for loss of the RSC income may however be re-directed to the metro.


But to understand why metro municipalities became a policy imperative we have to look into recent local government history. The partial answer goes back to 1998 and the three key reasons in the Local Government White Paper for establishing the metropolitan model:
1. Metros create a basis for equitable and socially just local governance
2. Metropolitan government promotes strategic land-use planning, and coordinated public investment in physical and social infrastructure;
3. Metropolitan government is able to develop a citywide framework for economic and social development, and enhance the economic competitiveness and wellbeing of the city.

It is important to recall that these principles emerged specifically in relation to the racially separate institutions, budgets and peculiar spatial patterns of apartheid cities - multiple fragmented municipal entities designed to preserve racial privilege and trap revenue. Unlike the first generation of metros, aspirant metros like BCM largely dealt with these issues in the transitional local council period (1995-2000). Re-demarcation of boundaries and institutional transformation was dealt with in 2000 - admittedly not always with complete success. Apart from adding a ward, no significant intuitional rationalization or spatial reconfiguration seems likely for BCM in the course of becoming a metro in 2011 - to the extent that there is a hangover from apartheid era, metro status is unlikely to remedy this.

Since the early nineties there has been renewed interest across the world in the economic significance of the major cities - they were seen as key economic pillars of the national economy - both generators and repositories of wealth. In South Africa in the late nineties, attention focused on the huge budgets wielded by cities like Cape Town, Johannesburg and Durban and the complex planning / financial strategies that this money clearly demanded. It was therefore understandable when in 2003 municipal leadership and local business in East London made a rare show of unity in rallying behind the metro campaign. But BCM’s claim to metro status was based on its economic potential rather than a proven track record. The decision to confer metro status on BCM was little more than a gamble and now we have to ask what has come of that potential in the last 8-10 years?

Metro status does not automatically confer better infrastructure, sound financial management, larger property rates bases, improved business climates or better housing. All of these are within the reach of a well run local municipality. To argue that greater benefits for municipal staff and councilors, (which almost certainly will result from metro status) will lead to better performance and stronger governance is to ignore the trends in municipal leadership and administration of the last decade. There is a strong possibility that a BCM metro will sit a poor cousin amongst existing metro municipalities with few changes in its political and institutional performance. Even more worryingly it could fuel heightened conflict amongst local politicians for council seats that carry more generous benefits.

Glenn Hollands is a partner at Mbumba Development Services but writes in his personal capacity.

References: National Treasury (2004) Trends in Intergovernmental Finances: 2000/01-2006/07. Pretoria. | National Treasury 2010: Local Government adopted Capital and Operating Expenditure budgets for the 2010/11 Medium Term Revenue and Expenditure Framework (MTREF) | MCA Planners and Mark Oranje, 2005: Revisiting the demarcation and establishment of metropolitan municipalities in South Africa: An exploratory paper, Prepared for: The Municipal Demarcation Board