There are growing concerns over the capability of the state to deliver services to its constituents. The National Development Plan (NDP) identified capacity issue as a main challenge undermining the creation of a democratic developmental state in South Africa (National Planning Commission, 2012). The Auditor General (AG) notes that problems exist in most municipalities, such as high vacancy rate for key positions or key officials lacking appropriate competencies; a decline in adequate consequence management for poor performance and transgressions; and a decline in the response rate to improve internal controls (Auditor General, 2018). Further to this, the Municipal Demarcation Board (2012) indicates that not all municipalities are able to perform their functions optimally as the majority were mired by capacity issues that undermined institutional effectiveness. Assessing and determining local government efficiency is therefore one of the most important components in ensuring institutional effectiveness within municipalities. It I the most important factor that has a direct bearing on the institutional effectiveness of local government is institutional capacity.