Municipal amalgamations and the feasibility of economies of scale in local government

Abstract

Background: Municipal amalgamation has become a prevalent trend in many modern nations, driven by a desire to enhance the size and scope of local government units. This expansion is primarily motivated by the prospects of economies of scale. Municipal mergers are seen as a method to guarantee that municipalities possess the necessary financial and technical proficiency to provide a wide range of services to their residents.

Aim: To ascertain the feasibility of economies of scale in local government and conditions that should be met in order to successfully achieve economies of scale.

Methods: This study utilised a qualitative research approach, which involved a content analysis of strategic documents from the Ekurhuleni Metropolitan Municipality, including the Integrated Development Plan (IDP) and the Growth and Development Strategy 2055 document.

Results: Economies of scale have not consistently served as an effective foundation for municipal reforms, as the merging of municipalities does not always result in improved service delivery or economies of scale.

Conclusion: Although municipal amalgamations are anticipated to enhance economic, social, administrative, and financial sustainability, thereby creating financially viable municipalities, they often prioritise sound financial management, institutional capacity building, good governance, and basic service delivery. However, this study discovered that these outcomes are not always realised.

Contribution: Municipal amalgamation is a relatively new concept in Africa and South Africa and, as a result, there is limited literature. This study aimed to provide a local context and perspective of municipal amalgamations.