Infrastructure failures force investors to leave Johannesburg

The closure of Dickon Hall Foods in Johannesburg should serve as a serious signal to all levels of government. This incident goes far beyond the simple closure of a production facility.

A Warning for Investment

This event serves as a clear warning that the City of Johannesburg is becoming an increasingly unreliable destination for industrial growth, manufacturing, and investment. When businesses begin to abandon South Africa's economic might due to the inability to rely on basic municipal services such as water supply, this is not about isolated service failures.

There is a direct economic consequence of years of political negligence, administrative incompetence, and infrastructure decay. As American economist Milton Friedman once noted: 'The most important single central fact about a free market is that exchange only happens when both sides benefit.' Businesses invest where the government provides stability, predictability, and functioning infrastructure. Once this social contract is broken, investments simply move elsewhere.

Reasons for the Company's Departure

This appears to be what happened in the case of Dickon Hall Foods. According to public information from Libstar Holdings, the company expressed concerns about unreliable municipal water supply as early as the 2023/24 financial year. These issues were not minor operational inconveniences; they represented a growing business risk threatening the viability of the entire production process.

Manufacturing differs from many other sectors of the economy in that production lines cannot continue operating when water supply becomes unpredictable. Food producers depend on uninterrupted access to clean water for sanitation, food safety, and regulatory compliance. Every hour without water directly leads to lost production, increased operating costs, supply chain disruptions, and decreased investor confidence.

Consequences of Failures

Reports indicate that by the end of 2024 and into 2025, repeated and prolonged water supply interruptions occurred at the Dickon Hall Foods facility in Soweto. It is reported that the company experienced up to 25 production shifts without municipal water and was forced to cost-effectively transport water by truck to maintain limited operations. These extraordinary measures, it is claimed, contributed to operational losses averaging around 17 million rand. No responsible investor can absorb such losses indefinitely.

What makes this situation particularly alarming is that the decision to relocate was apparently not driven by labor costs, taxation, or market demand. It seems to have been caused by a complete loss of confidence in the ability of the City of Johannesburg to guarantee something as fundamental as reliable water supply.

Relocation of Production and the Future

Businesses understand that infrastructure sometimes fails. However, they cannot accept a municipality that cannot demonstrate a convincing plan to restore reliability, maintain essential services, or provide certainty for future investments. By the end of 2025 and into 2026, the operation in Johannesburg was announced to be closing, production was moved to the Western Cape, and employees faced layoffs or relocation.

While the human cost of these job losses is devastating, it is a symptom of a deeper problem. Investors have already made their decision. Once trust in municipal governance disappears, capital follows certainty elsewhere, and employment inevitably follows suit. Municipal infrastructure is economic infrastructure. Reliable water, stable electricity, well-maintained roads, functioning sewage systems, and responsive municipal governance are the foundation upon which investment decisions are made.

Investors are leaving Johannesburg not because they have stopped believing in its economic potential. They are leaving because they no longer believe the city can provide the certainty necessary to protect long-term investments. Investments are built on trust. Trust is built on competence. And a reputation, once lost, is extremely difficult to restore.

Economic growth cannot be legislated into existence. Investments cannot be secured through speeches or political slogans. Investors put capital where governments consistently provide certainty, reliability, and competent management. The inability to maintain infrastructure is ultimately the inability to protect investments. Once investors conclude that municipal risk outweighs commercial opportunity, they direct their capital elsewhere. Job loss is not the cause of the crisis; it is its inevitable consequence.

Restoring investor confidence begins with restoring municipal competence. This means prioritizing preventative infrastructure maintenance, increasing the reliability of water and electricity supply, improving project management, ensuring accountability across municipal governance, and creating an environment where investors are confident that the city will fulfill its most basic duties. The story of Dickon Hall Foods must not remain forgotten news. It must become the moment when Johannesburg acknowledges that infrastructure failure is no longer just an engineering problem, but an economic crisis.

We face a simple choice: restore competent municipal governance and regain investor trust, or continue watching capital, investment, and productive industry migrate elsewhere. Johannesburg will not be able to compete for investment if it cannot provide the basic infrastructure required by modern economies. If we do not take action, Dickon Hall Foods will not be remembered as an isolated case. It will be remembered as a warning we ignored.

iol.co.zaJuly 7, 13:00

National Treasury Suspends Transfers to Municipalities Due to Financial Mismanagement

The National Treasury has temporarily suspended the transfer of municipal grants for July 2026 to over 60 local government structures, including Johannesburg. This decision was made because these structures failed to promptly resolve their financial issues.

Reasons for Funding Suspension

The National Treasury announced the temporary withholding of transfers due to 'persistent and serious non-compliance' with the Municipal Finance Management Act (MFMA) and related provisions, despite support provided by the Treasury through consultations, engagement, and communication.

Scale of Financial Problems

The announcement of transfer suspension affected numerous municipalities in South Africa and revealed widespread financial mismanagement. Municipalities incurred losses amounting to R24.12 billion in early and wasteful expenditure since 2021-22. Furthermore, irregular expenditure reached R145.21 billion, with R40.14 billion recorded just for the 2024-25 financial year.

Additional Financial Indicators

Since 2021-22, municipalities have disclosed R118.13 billion in unauthorized expenditure, of which R63.43 billion relates to budget items not involving cash. In 2024-25, 116 municipalities (45 percent) adopted unpaid budgets, which is higher than the figure of 113 (44 percent) in the previous year's adjusted budget.

Debt and Reporting Issues

By the end of 2024-25, municipalities owed Eskom R3.40 billion in interest and water boards R1.21 billion in interest. Moreover, 48 municipalities (20 percent) had overdue third-party deductions exceeding one month. The National Treasury noted that many municipalities failed to process instances of unidentified, irregular, fruitless, and wasteful expenditure (UIFWE) through their Municipal Public Accounts Committees (MPACs).

Consequences of Non-Compliance

The Treasury stated that non-compliance with financial legislation is not only a failure of fiduciary duties by municipal political and administrative leadership but also threatens the financial sustainability of essential service providers such as water boards and Eskom. Non-payment to third parties negatively impacts the ability of public bodies to function optimally.

Requirements for Resumption of Payments

Transfers will resume after the affected municipalities meet the necessary conditions and provide proper confirmation of their fulfillment. The Treasury expects the suspension to be short-term so as not to affect service delivery. It was emphasized that municipalities were given sufficient written notice urging them to take steps to improve their financial situation before the funds were frozen.

Expert Opinion on Local Governance

Professor Joseph Sekhampu, Director of the NWU School of Business, noted in a recent statement that the consolidated Auditor-General's report for 2024-25 showed that none of the metropolitan municipalities received an unqualified audit. Five metros have a qualified audit opinion, compared to two at the beginning of the sixth term.

According to Professor Sekhampu, total water losses in eight metropolitan municipalities amounted to nearly R10 billion, electricity losses exceeded R17 billion, and the average creditor payment period reached 121 days. He suggested that the dominant explanation for local government problems in South Africa has always been that many municipalities are too small, poor, and administratively fragile to operate effectively. However, according to the professor, the findings regarding the metros point to a different governance issue: metropolitan municipalities are not primarily constrained by resource scarcity, as they manage R336 billion—about 54% of local government expenditure—and serve almost 25 million people, possessing the institutional and financial capacity expected of large urban governments, yet continuing to face serious management breakdowns.

iol.co.zaJune 26, 15:00

Inefficient financial operations become a serious business risk in South Africa

In the context of an unpredictable economic situation, it is becoming critically important for finance teams to transform from back-office functions into strategic partners to ensure business survival. In many companies, finance is still viewed merely as an accounting and record-keeping function, but this view is outdated in the current economic climate.

The Strategic Role of Finance

Financial departments must play a more strategic role to ensure the sustainability and survival of the enterprise. Since companies no longer operate in stable and predictable environments, they need systems that allow for faster decision-making, dynamic risk management, and prompt response to rapid changes in the economy.

Cash Flow Challenges in South Africa

Pressure on South African businesses is increasing. In the current economic environment, companies cannot afford financial leaks amid rapidly changing macroeconomic factors. According to Statistics South Africa, the formal business sector had debt of approximately 9.8 trillion rand in 2024. Furthermore, Allianz Trade predicts that about 1540 enterprises may face insolvency in 2026.

Even enterprises that can secure financing are facing rising borrowing costs, and inflationary pressure affects both consumers and organizations. The reality is that many companies can no longer pass on rising costs directly to customers, putting even large enterprises in a vulnerable financial position.

Inefficiency as a Path to Failure

In South Africa, inefficient financial operations lead to collapse because companies operate under conditions of low growth and high pressure. In this environment, strong financial management goes beyond simple balance sheet reconciliation; it includes maintaining transparency, protecting cash flow, managing risks, and ensuring long-term business existence.

Intellectual integrated accounting systems, such as Duplo, become crucial here. The main question is not whether companies can afford to implement the best tools, but whether they can afford not to.

Growth and Manual Processes

Modern finance teams are under increasing pressure to reduce absolute costs and improve budgeting efficiency. Growth is achieved not only by increasing sales but also by retaining a larger portion of the revenue generated. A common misconception is viewing automation solely as a way to save time.

Many companies hesitate to adopt new technologies due to perceived costs, the time required for team adaptation, and the complexity of integrating new systems into existing workflows. These concerns are understandable, as any new system requires investment, training, and adjustments.

Data Management Difficulties

As businesses grow, financial operations become more complex: the number of approvals increases, payment volumes rise, and reporting requirements expand. Finance teams often have to manage critical processes using spreadsheets, email, banking portals, messengers, and disparate systems.

The greatest cost of manual reconciliation is not the hours spent on it, but the financial risk that arises when the business does not see the full picture. The problem is not just data collection; most organizations already have access to large volumes of financial information. The difficulty lies in creating a single source of reliable information that allows finance teams to understand what is happening in the business in real time.

When teams operate across multiple spreadsheets, banking portals, emails, and unconnected systems, it is extremely difficult to maintain a single source of truth. Manual and fragmented bookkeeping increases the likelihood of revenue leakage. Most companies lose money not due to one major error, but due to hundreds of small oversights that go unnoticed.

The Future of Finance is Connection

The future of financial transformation lies in gradual modernization and the creation of embedded, connected financial ecosystems. In today's economy, financial transparency is no longer a matter of past reporting; it is a matter of responding to the present.

This is why Duplo combines expense management, approval workflows, accounting integrations, payments, and financial control under one roof. Reducing fragmentation allows businesses to automate processes, improve oversight, and minimize operational inefficiencies and revenue leakage that often occur when teams work across multiple disparate systems. Companies can prevent leaks and often offset some cost increases, but they need to identify these issues early enough. Technological systems may require costs, but they will always be significantly cheaper than human error.