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The increasing strength of representative democracy in South Africa has profoundly changed the nature of the participatory process in urban development. Building on a wide range of sources, we analyze the changing policy framework in South Africa, and assess its impact on small‐ to medium‐sized development projects in Cape Town, Johannesburg and Durban. We then analyze the relationship between the changing role of national government and the nature of participation, in particular, its impacts on institutional change at a local and national level. Findings are theorized in terms of the international debates on urban governance and participatory development. [ABSTRACT FROM PUBLISHER]