The efficiency of public expenditures on basic services: The case of South African municipalities

Abstract

This paper examines the efficiency of service delivery across 213 local and metropolitan municipalities in South Africa, focusing on four critical areas: electricity, water, sewerage and waste removal. Utilising a order‐ partial frontier efficiency analysis (PFEA), the study calculates output‐oriented efficiency scores for each municipality, incorporating adjustments for service quality based on an ‘infrastructure quality‐index’. Our empirical findings indicate marked variations in efficiency, with electricity services exhibiting the highest efficiency rate at 35%, while waste removal lags behind at 22%. Additionally, municipalities centred around small urban towns are found to be more efficient, challenging the widely held view that larger municipalities are better equipped for efficient service delivery. The analysis offers empirical insights into local government performance in South Africa, underscoring the need for targeted policy interventions to address efficiency gaps. These results not only inform fiscal and administrative decentralisation strategies but also set the groundwork for future research exploring the underlying factors affecting municipal efficiency.