Minister of Finance Tito Mboweni’s 2019 Budget review urged municipalities to ease their dependence on the national fiscus for infrastructure funding and instead attract private investment and take advantage of incentives that reward good governance.
The Budget review said infrastructure grants would be changed to increase flexibility and incentivise private financing.
It said policy around municipal borrowing would also be reviewed with a view to getting municipalities to diversify their funding sources.
"Regulation of development charges is being reformed, with the potential to increase local government capital spending by as much as R20bn per year," the budget review said.
Currently municipalities are given a conditional grant to develop, maintain and refurbish infrastructure.
However, while the grant is fixed to specific purposes, municipalities either spend it on other expenses or fail to spend it altogether.
The Budget review said government would introduce urban reforms which aimed to promote faster growth and densification in metropolitan municipalities through mixed-use, mixed-income living environments.
"The intention is to attract substantial contributions from the private sector over the long term.
Taken together, seven priority programmes under way in the metros are worth an estimated R32.6bn, the budget review said.