There is a growing need to understand how climate change impacts not only on people's livelihoods but also on the level and cost of local government infrastructure required to provide basic commodities such as water and energy. In South Africa, few studies have examined the impact of climate change on operations of local governments. This paper examines the impact of rainfall variability on municipalities’ water and energy demand. A non-linear relationship between water and energy demand and rainfall variability was found. The results suggest that, by influencing the operations and budgets of local governments, climate change is a real threat to local governments. The local governments need to be proactively involved in the efforts to adapt to and mitigate climate change. This is particularly important in developing countries where the impact of climate change is more severe than in developed countries, yet adaptation and mitigation capabilities in these countries are weak.