South African municipalities are the small units of government within the country which are responsible for local economic development and the maintenance of good quality public infrastructure. The head of a local municipality is generally elected based on a list of party members which are then confirmed by a voting process and approved by a governing board made up of a quorum of at least ten local residents. The municipalities are generally small towns and cities, each with its own government and administration. They elect their mayor, commissioner of roads and transport, mayor and sometimes aldermen, who will hold office for one year.

Because of the way the South African municipalities were designed, it is possible for many to experience corruption in their municipal finances. The municipal funding model has been established in a way where there are surpluses or profits from the taxation of property and wealth, rather than direct revenues coming in from salaries and wages of the people. Due to this, there are opportunities for absentee owners to take advantage of the good drainage systems and cheaply build luxurious dwellings for themselves, while the locals struggle to get basic services. Because of this, the government is forced to raise taxes in an effort to balance the books and make up for the revenue loss.

Because South Africa is a mostly rural economy, rural areas are bound to suffer most during times of financial crisis, which is why the national government must take immediate action to support the local authorities. This is where the role of South African municipalities becomes very important. By forming a body called municipality, they can not only receive federal funding for projects through the national government, but also maintain the tax bases of the municipalities and generate surpluses for the benefit of all citizens. The South African municipalities are generally made up of at least five incorporated regions, with each region having a mayor and council which are elected for a fixed term. In addition, the municipalities can engage in many different activities like development of the community, running the day to day business functions, purchasing land, developing the parks, roads, and other infrastructure that support the development of the towns and cities.

In terms of finance, the South African municipalities have developed a participatory budget system, which determines the expenditures and revenues for the city and the overall municipalities. In order to fund the basic services, the municipalities issue bonds to be used by citizens as repayment for their taxes. Bonds are issued by the municipalities throughout the country, with each issuing a unique bond which specifies the annual amount of tax that will be charged on properties and homes. Because the rates of taxation are normally high in South Africa, it is important that citizens purchase properties only after they have paid their taxes to the South African municipalities. The primary way of doing this is to go to the municipality and apply for an auction.

Because most of the South African cities and towns are economically and technically developed, the lack of financial management has resulted in the inability of the municipalities to service their basic services and meet the needs of their citizens. During times of financial mismanagement, citizens often lose money when they are unable to pay their taxes or they receive poor quality services. Most of the time, the primary way of addressing these problems is through the appointment of a mayor and / or a supervisor who will take over the administration of the local government. Although the primary role of a mayor is to represent the interests of the community in the formulation of local government policies, they also have a number of responsibilities related to providing good government and ensuring that the infrastructure provided by the municipalities is maintained. For example, some of the responsibilities of the mayor might include: developing strategies to reduce poverty, increasing community awareness about local development issues and addressing social exclusion and disadvantage.

When it comes to financing, the South African municipalities have developed a participatory budget system, through which citizens can choose how to fund local government programs. However, while the South African District Governments have adopted a model known as the mixed method of financing, which enables them to use tax revenues from various sources to provide services, the cities are not bound by this system. Instead, they tend to adopt a uniform system of taxation, which includes sales tax, vehicle tax, tobacco tax, property tax, as well as a variety of other taxes. In addition to this, the government has introduced a tax on the importation of goods into the country and on the cultivation of crops.