President Thabo Mbeki denounced municipalities that allocate land near cities to developers who build for the upper end of the housing market.
"We must stop this practice because by so doing we are failing to use housing as a catalyst to integrate communities that have been divided for many years by apartheid," said Mbeki yesterday.
Speaking at the national conference of the SA Local Government Association (Salga) in Midrand, Mbeki said municipalities had not responded positively to the transformation of apartheid settlements.
Mbeki told councillors and mayors that it was unacceptable that land close to commercial centres was allocated solely to developers.
"One of the challenges we identified in 2004 was the need to transform the apartheid settlement patterns. Except for a few cases, our municipalities have not responded positively to this challenge.
"We still see settlement patterns where new houses for poor black people are built on the outskirts of our towns, far from places of employment," he said.
"Again, we also see the unacceptable practice of municipalities allocating land for housing and commercial centres without ensuring that sports grounds and parks are also built.
"In this regard, too many of our children grow up with no place to play and no facilities for them to engage in sport," he said.
Salga chairman and Johannesburg mayor Amos Masondo said one of the challenges facing local government was corruption.
He said ongoing allegations of the involvement of councillors in the allocation of resources and participation in procurement processes was worrying.
"Accordingly, a local government anti-corruption strategy focusing on prevention, detection and investigation has been developed," said Masondo.