Is there a pervasive urban and rural divide of revenue management challenges in the South African local government? A systematic literature review

Abstract

Background: Municipalities are expected to collect revenue effectively from their own communities in order to ensure sustainability. However, this is not as easy as it sounds as municipalities have challenges when it comes to the collection of revenue. Little is known on the convergence and divergence of such challenges as a result of the rural and urban nature of municipalities, hence, the contributory value of the study in exploring that phenomenon.
Objectives: This study aimed to perform a literature study with an objective of identifying nuances in revenue collection challenges between the South African urban- and rural-based municipalities in a systematic way, leading to a conceptual framework on the phenomena that may guide future researchers who will explore revenue collection in different South African local contexts.
Method: A systematic literature review is used. The investigation is based on sources of information such as journal articles between 2005 and 2025. Key words of ‘revenue collection in municipalities’ and ‘local government revenue’ were used in the searches of the academic databases, which included JSTOR, Science Direct, Emerald, SCOPUS, IBSS and JSTOR.
Results: Findings indicate that both the rural and urban municipalities face similar challenges (although to varying degrees) in revenue collection. Issues such as corruption, lack of and poor human skills, culture of entitlement and non-payment, lack of commitment by municipal officials, socio-economic factors of local populations, among others, have a negative impact on revenue collection by the South African municipalities.
Conclusion: This study recommends a conceptual framework on revenue management in the context of local government. Furthermore, it was found that the rural municipalities have additional unique revenue collection challenges in villages, where services such as water, waste refuse and in some instances, rates and taxes are not being paid. Finally, it was found that the Local Government Equitable Share (LGES) Formula, which is used by the national government to allocate the equitable share revenue to the municipalities, does not take into account key factors such as the rurality of the municipalities; this exacerbates the challenges. Similarly, the LGES does not take into account the vast geographical distances of certain municipalities, which significantly increase the cost of service of certain municipalities.
Contribution: Using the political legitimacy theory to revenue collection, the study contributes to the understanding of the shortcomings of LGES Formula as it pertains to the rural exclusion and distance factors. There is an opportunity for scholars and policymakers for an exploration of the feasibility, pertaining to new revenue sources such as rates and taxes of some form in the villages of the rural municipalities.