Joburg on brink of financial collapse, can't pay its bills

Key topics:Johannesburg faces decay, debt crisis, and failing servicesCoalition politics fuel corruption and stalled projectsPrivate firms step in as city nears financial collapse.By Antony Sguazzin.At the city-owned Johannesburg Art Gallery, paint is peeling off the rain-damaged ceiling, the elevator doesn’t work and parquet tiles are loose and cracked. Years of neglect of the 111-year-old gallery, a once-grand building now surrounded by inner city decay, has led to the relocation of the bulk of the collection’s more than 9,000 artworks. Original paintings by Claude Monet and Pablo Picasso sit in galleries elsewhere in the city, some of them private.The situation is just one indication that Africa’s financial capital, also known as “the place of gold” for once being the site of the world’s biggest gold rush, is on the verge of collapse. Water and power outages are frequent, streets are potholed and many of the abandoned high-rises in the city center have been appropriated by armed gangs who extract rent from squatters. Added to that, most capital projects have ground to a halt, the city has failed to collect on billions of dollars in debt and long-term loans have been taken out to service recurrent expenditures, according to the opposition party. .Read more:.How Johannesburg can be pulled back from financial collapse: Helen Zille.Last month, South African Finance Minister Enoch Godongwana told Johannesburg Mayor Dada Morero that his city will lose crucial state funding unless it addresses $1.4 billion in wasteful spending and cancels plans to raise municipal workers’ wages by more than $600 million over this year and next. (The labor union representing the employees says it expects the city to honor that pledge.) This is an unprecedented situation for Johannesburg, which on paper should have no problem paying its bills. The city boasts more millionaires than anywhere else in Africa, is home to the bulk of the country’s big companies and hosts a stock exchange that has more than 10 times the daily trading volume of its biggest rival on the continent..“Johannesburg possesses arguably the strongest municipal revenue base in Africa, supported by major corporates, affluent suburbs and significant economic activity,” said Kevin Allan, managing director of Municipal IQ, which tracks the performance of South Africa’s 257 municipalities. “But a strong economic base does not automatically translate into a well-run municipality.”As the city sits at the heart of three contiguous urban areas that together account for about a third of the country’s economic output, this volatility could lead to even bigger problems. “Johannesburg’s decline should concern every South African because it is the engine room of the economy,” said Busi Mavuso, the head of lobby group Business Leadership South Africa. The problem boils down to politics. Since the African National Congress lost its majority in 2016 elections, the city has been run by a series of fractious coalition governments and had 10 mayors, including one from a tiny party who was accused of ties to a funeral-policy fraud scam. With no barrier to entry in terms of voting thresholds, 18 parties are currently represented in Johannesburg’s council. As frequent council seat changes have become the norm, so have inconsistent policies, stop-start projects, corruption scandals and wasteful spending..Read more:.David Ansara: Despair (and hope) in downtown Johannesburg.“When you have unreliable partners you flip-flop. Today you are in, tomorrow you are out,” said Chris Santana, who oversees finances for councilors in the Democratic Alliance party, which has led ruling coalitions in the 4.8-million-person city in the past. “There’s no consistency, no institutional knowledge. That’s where we find ourselves today.”This constant churn has also made Johannesburg a shorthand for out-of-touch politicians. Last year, Morero pledged to clean up neighborhoods used by visiting dignitaries during Group of 20 meetings after President Cyril Ramaphosa told him the city was “filthy,” sparking protests from residents in other underserved areas. And speaking to media about residential anger over water shortages, the leader of Gauteng province, where Johannesburg is situated, confessed he uses hotels to take showers. .When reached for comment, the City of Johannesburg’s communications department referred queries to mayoral spokeswoman Khathu Mulaudzi, who referred them back to the communications department, saying “these are city issues and deserve a city response.” City spokesman Nthathisi Modingioane referred queries back to Mulaudzi.The chaos in Johannesburg is in some ways the culmination of problems that have festered for years. Until the 2008 financial crisis, South Africa enjoyed its strongest period of economic growth in the democratic era. Johannesburg, then firmly under the control of an ANC yet to be sullied by allegations of corruption, was slated to host the 2010 football World Cup.To prepare Johannesburg for the international stage, authorities sought to address the fallout of “White flight” — a phenomenon in which companies and wealthy individuals abandoned the city center for northern suburbs, leading to downtown decline and again cleaving the landscape along racial and economic lines. Improving transit connections was seen as the best way to fix this. Officials broke ground on the start of a high-speed railway network, repaired highways and began building the first stations on what were meant to be low-cost bus routes. “Until the World Cup, everything was tightly controlled, delivery happened,” said David Everatt, a professor at the city’s Wits School of Governance who researches inner city decline. .But after the tournament, these projects languished. The rail network was never expanded as planned, and half-built bus stations have sat idle for more than a decade, locking people into an apartheid-era transport system that costs the poor up to 40% of their income. After Jacob Zuma became president in 2009, the ANC’s popularity plummeted as his tenure was plagued by corruption. From then on, said Everatt, we see “more factions within the ANC and by 2016 we are into coalition politics. Every decision becomes politicized. It becomes, ‘What can we extract from this decision?’” Those dynamics persist to this day, he added. .Now, Johannesburg is at an inflection point. If the finance minister goes ahead with his threat to yank $480 million in funding, it could render the city incapable of meeting payments to creditors, adding to arrears that Godongwana has already put at $1.5 billion, citing recent financial statements supplied to the Treasury. Just this week, the state power utility took out a full-page newspaper advertisement threatening to cut off parts of Johannesburg’s electricity if the municipality did not pay the $320 million it owes to the company.The private sector is now stepping in to fill in some gaps. Health insurer Discovery Ltd. is fixing potholes, an initiative partly funded by Anglo American Plc is erecting streetlights in the city center and some of the Johannesburg Art Gallery’s most prized works are being kept at a gallery owned by Standard Bank Group Ltd. “We are trying to find ways of leaning in,” said Mavuso, the business lobby group leader, after the president asked that businesses do more..In addition to the challenges for residents, Johannesburg’s troubles pose a political headache for Godongwana. Both he and Morero are ANC members, and if Godongwana were to order the provincial government to take over the city, it would be a gift to the ANC’s biggest rival, the Democratic Alliance, which is leading in polls ahead of local elections in November. The DA’s mayoral candidate, former Cape Town Mayor Helen Zille, has released ads featuring her swimming in giant potholes and fishing in slimy municipal swimming pools. In a statement on May 6, hours after the letter from the finance minister leaked, Morero assured the public that “there is no cause for concern” and said he would engage with Godongwana. A day later, he issued another statement asserting that the city wasn’t bankrupt and reiterating his commitment to “stabilizing municipal finances.”.Read more:.Johannesburg’s decline spurs business talks on city rescue.Yet with polls showing that no party will win a majority this November, Everatt isn’t optimistic that the situation will change.“This government is so on its last legs. They are waiting for the next coalition to replace the last coalition,” he said. “I am not sure that we have hit bottom yet.”.© 2026 Bloomberg L.P..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. 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Joburg on brink of financial collapse, can't pay its bills

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