Why local government fiscal health must be climate-proofed

IOL News

11-06-2025

As South Africa reviews the 1998 White Paper on Local Government, we must confront a climate reality that our municipal systems were never designed to withstand.
We are facing an increasing frequency and complexity of disasters, driven by climate change, urbanisation, and entrenched socio-economic vulnerabilities.
These disasters are no longer isolated shocks; they are the new baseline. And they are cutting municipal budgets—often with irreversible consequences.
Over the past two decades, South African municipalities have absorbed the cost of increasingly frequent and severe climate-related disasters.
While the Disaster Management Act (DMA) provides a foundational legislative framework, recent events have exposed critical gaps in coordination, early warning systems, and institutional capacity at the local level.
We need to capitalise local government for climate Action
Municipalities financial strain is staggering.
According to the Financial Protection Forum and the World Bank, annual disaster relief costs in South Africa cost an average of R3.7 billion per year, with uninsured losses accounting for 86% of the total, necessitating significant government support.
The annual funding gap is projected to exceed R2.3 billion, compared to the current pre-arranged funding of R1.4 billion.
Municipalities, especially those in vulnerable coastal regions, face a vicious cycle.
Disasters destroy infrastructure, diminish the tax base, and force diversion of funds from planned development to emergency relief.
Compounding the issue, critical infrastructure built to outdated standards is collapsing under the strain of today's climate.
This is not just about emergency responses.
These are structural fiscal threats that require structural governance reform.
In addition, municipalities do not always have the resources to meet the need for infrastructure maintenance and climate-resilient development.
The current review of the White Paper on Local Government is an opportunity to redefine the mandate and machinery of municipalities. It is time to embed climate resilience not as an add-on, but as a foundational pillar of local governance.
From its work with municipalities and local governments, even cities and towns with strong climate change policies, are not streamlining these policies across departments within local government.
Evidence shows that climate change training within cities is perfunctory and not integrated into planning, land-use management or even the development of human settlements.
The Fiscal Framework for Local government needs a revamp
Funding mechanisms for disasters are reactive and delayed, often reallocating municipal budgets with adverse effects.
Capacity constraints include an aging workforce, lack of succession planning, and insufficient skilled personnel.
To address these shortcomings, municipal budgeting processes must internalise climate risks.
This includes mandatory climate impact assessments for capital projects, ring-fenced adaptation funding, and performance incentives tied to resilience-building.
Secondly, the intergovernmental fiscal system needs a redesign.
The Equitable Share formula and conditional grants must evolve to reflect disaster vulnerability and adaptation costs, not just population and service coverage.
Fiscal equity in a country faced with increasing climate change disasters means prioritising the municipalities most at risk.
Thirdly, smaller and rural municipalities need urgent support to build the technical and institutional capacity for adaptive planning.
Without this, climate impacts will continue to widen the inequality gap between metros and outlying areas.
Financing and investing in climate resilience
The current White Paper was born in an era that did not yet grasp the scale of instability we now face.
Today's municipalities must be more than service providers.
They must become ecosystem stewards—local actors capable of managing risks that transcend administrative borders and temporal planning cycles.
The Presidential Climate Commission (PCC) published recommendations on the Disaster Management System in South Africa following Extreme Climate-Related Weather Events, where it recommends strengthening institutional coordination and governance through enhanced multi-agency collaboration and intergovernmental cooperation.
Establishing an independent, centralised coordination entity with authority to oversee disaster management at all levels is critical to reduce bureaucratic delays and political interference.
The logic of an ambitious climate action and energy transition action plan is underpinned that while the issues we face are global, the most effective solutions are local. Cities are where policy meets reality.
Across the country, communities are responding to the impacts of climate change.
Yet, the public and private financial systems designed to support climate adaptation continue to overlook these same communities.
Local actors are too often left on the sidelines of investment decisions that directly affect their futures – despite possessing deep knowledge of their ecosystems, vulnerabilities, and strengths.
These challenges aren't one-off or new problems—but a deeper reflection in how adaptation finance is designed and delivered, from climate adaptation to equitable service delivery, the local government overall will ensure that the global urban agenda is meaningful for climate action.
For those with deeper pockets - banks, insurers, investors, and development finance institutions, the challenge is to move beyond business-as-usual—to rethink how capital is deployed] and what resilience truly looks like.
Zimasa Vazi, Senior Manager, Stakeholder Relations, presidential Climate Commission.