Economies of Scale by Municipality Size: An Empirical Analysis of South African Local Government

Despite extensive international research on economies of scale in municipal service delivery, the topic remains underexplored in South Africa and Africa. This study aims to address this gap by examining the relationship between municipality size—measured by population size and staff numbers—and economies of scale in the municipal service delivery. Drawing on data from district and metropolitan municipalities between 2016/17 and 2019/20 and employing regression analysis, the results show a significant U-shaped relationship between both population size and total expenditure and staff numbers and total expenditure. Importantly, these effects vary between metropolitan and district municipalities. For example, expenditure tends to decrease with increasing population size up to a threshold of approximately 158,000 residents, beyond which diseconomies of scale emerge. These insights offer practical implications for regional planning and service delivery strategies, particularly in guiding decisions on municipal consolidation and resource allocation.