Following the signing in July 2023 of a pledge by the CEOs of 115 corporations to contribute to “building the country” through “strategic partnerships and focused interventions” so as to achieve “sustainable, inclusive economic growth”, former president Thabo Mbeki issued a widely publicised warning against surrendering government functions to the private sector. More recently, former deputy finance minister Mcebisi Jonas also cautioned against outsourcing governance responsibilities to “boardrooms in Sandton”.

The former leaders’ concerns have also been cogently elaborated in the pages of Daily Maverick. For instance, Zukiswa Pikoli points to the self-serving profit motives of business and warns against letting government off the hook for complying with its democratic mandate, while Stephen Grootes emphasises how the privatisation of essential service provision risks escalating the already unacceptable levels of inequality in our society and leaving behind the many millions of residents who are unable to afford privatised services.

As Grootes points out, the seeming recent softening of South Africans’ historic scepticism towards the private sector has largely been brought about by state failure, as reflected by load shedding, bankrupt SOEs and State Capture. Nowhere is this state failure more apparent than in the collapse of local government, where bypassing the state is increasingly seen as the only way residents, poor and rich, can sustain access to basic services.

The local scale is also where businesses’ interests closely intersect with those of residents. It is, after all, from local communities that most businesses draw their workforce and their customer base, and where their ability to turn profit is concretely influenced by a sustainable supply of energy, water, sanitation and waste management services. At the same time, local residents depend on business for employment and for a range of supplies and services, not all of which overlap with those supplied by the state.

Business interests have further long been intertwined with the business of the state at local government level. Several South African cities (such as Vanderbijlpark, Sasolburg and Welkom) were built or initially run as “company towns”.

Many of the governance challenges we currently face will arguably only be overcome through close collaboration between ‘all-of-society’.

In many others, corporations have long fulfilled different kinds of governmental functions (from water purification to building houses) under a great variety of arrangements (from complete “outsourcing” of a function to one-off contractual agreements aimed at supplementing municipal capacity).

Much of this history indeed presents a cautionary tale of communities exploited, destabilised and environmentally devastated by corporate activity, only to be abandoned by their “benefactors” once profits run dry.

But there have also consistently been instances of more benign and uncontroversial, as well as more civic-minded and socially responsible, corporate activity and investment. The latter was arguably most evident during the Covid-19 pandemic, when corporations not only contributed significantly to the national Solidarity Fund but were also crucial partners in propping up the health system, for instance by helping to set up and run field hospitals, which saved many lives.

As our municipalities have failed in recent years, it is often to local business that communities have turned to put pressure on the state (such as by taking legal action when Eskom threatens to cut off the electricity supply to entire towns when municipalities fail to pay their bills) or to take over or assist with some aspects of its service provision (such as when members of the Nelson Mandela Bay Business Chamber started fixing leaks in Gqeberha’s failing water infrastructure to help save the city from a “day zero” scenario during its current debilitating drought).

Indeed, as the South African Cities Network’s most recent State of South African Cities report has emphasised, many of the governance challenges we currently face will arguably only be overcome through close collaboration between “all-of-society”: Local, provincial and national government, other organs of state, civil society organisations, organised labour, universities, communities and businesses.

Given the state’s capacity shortages, many of our towns and cities simply cannot operate optimally without leveraging the skills and resources commanded by the private sector.

For instance, in many smaller towns, municipalities simply do not have the engineering and plumbing skills to maintain essential water and sanitation infrastructure. There, it makes imminent sense to contract out implementation of relevant public projects to the local business community.

State control

However, for the full range of public-private governance “partnerships” to consistently advance the public interest rather than (only) private profit, it is important to ensure that our local governance systems and accountability structures both enable and harness corporate involvement while ensuring state control over, and rights-based accountability for, relevant processes and projects.

To this end, my recent research questions the fitness of the current state of South African local government law for productively but accountably bringing business on board.

Our Constitution affords municipalities significant autonomy as well as executive and administrative authority over many aspects of urban form and functioning, and provides for the devolution of a range of further functions to capable municipalities.

While the scale and depth of recent municipal failings have understandably led to calls for increased national and provincial monitoring and intervention, the ends of such must be to better equip local government to effectively take charge of its own problems and to commandeer local skills and resources towards their resolution.

The Municipal Systems Act inclusively defines municipalities as encompassing their “political structures and administration” alongside their “community”. The “community” is in turn defined as including residents and ratepayers, civic organisations, NGOs, the private sector and labour organisations.

All community members are granted a right to “contribute to the decision-making processes of the municipality”, and must be consulted in the formulation of municipal integrated development plans, budgets, performance management processes and strategic service delivery plans.

Mindful of the risk of sidelining poor and disadvantaged residents, the act explicitly requires that they should be equally included in the relevant processes.

The Municipal Systems Act further allows municipalities to establish consultative forums and committees to engage with any of their stakeholders over a broad range of everyday governance issues. On paper, there can (and must) thus exist several platforms in which civically minded businesses can contribute to discussions about what needs to be done in a municipality, and offer their assistance where appropriate.

Few municipalities have functional platforms for meaningfully involving corporate stakeholders, civil society or other community members in their strategic decision-making.

When it comes to entering into “formal” public/private partnerships, such as to “outsource” a particular service delivery function, the Municipal Finance Management Act and its accompanying regulations supplement the Municipal Systems Act to require that community members must be consulted on the terms of arrangements, and must be involved in their ongoing monitoring and review.

These regulations have been criticised for being overly rigid and cumbersome, and arguably require amendment to allow for more flexible, short-term and dynamic ventures between municipalities and their corporate stakeholders.

However, they rightly locate the ultimate decision about the manner in which services are delivered with municipalities, and rightly prohibit “outsourcing” agreements being negotiated behind closed doors or being insulated from public scrutiny.

Of course, there have been serious shortcomings in implementing this legal framework. Few municipalities have functional platforms for meaningfully involving corporate stakeholders, civil society or other community members in their strategic decision-making.

Added to this, political participation structures such as the ward committees provided for by the Municipal Structures Act (which, lest we forget, provides constituency-based accountability for municipal councillors alongside input into councils’ political deliberations) are widely regarded as dysfunctional.

Read more in Daily Maverick: The four stages of privatisation of state assets — neoliberalism, corruption, incompetence, collapse

But these shortcomings are very much within communities’ powers to fix, by simply becoming involved in local governance affairs and insisting that their rights be respected. Indeed, our Constitution provides that rights-based accountability can extend also to non-state actors who are closely connected to the business of the state.

I would thus agree with Zukiswa Pikoli that the solution for local governance failure lies “somewhere between leveraging the existing systems for public participation and monitoring the state, and not simply turning to a short-sighted parallel system of pseudo-governance”.

But this does not mean that solutions need to be limited to the state. As President Cyril Ramaphosa emphasised by referring to a broader “social compact” in his most recent State of the Nation Address, the tools with which to fix the state are located with all of society.

And the framework within which to accountably wield these tools, in a way that leaves no one behind, already exists. DM

Note: The research referred to in this article is funded by the National Research Foundation.