This chapter explores and reflects on the role of territorial governance and public policies in transforming the spatial economy of urban areas in South Africa during the post-apartheid era. Contemporary South African cities and towns are reproducing the legacy of colonial and apartheid patterns of economic exclusion and inequality, albeit at an industrial scale, perpetuating the entrapment of the majority of urban inhabitants in dormitory townships, devoid of meaningful economic opportunities, underserved in terms of basic utility services, public transport and critical social services and remotely located from established urban centres. This chapter reflects on why spatial and economic policy interventions by the state, inadvertently obstruct the poorest residents of towns and cities from accessing economic and other opportunities, even though South Africa’s constitution and plethora of legislation are geared at building a socially, economically and spatially just and inclusive society. This critique aims to unearth the implications and contradictions in the state’s policy and legislation over the last 30-years and reflection on the required changes to the state’s approach to urban development and territorial governance to advance economic transformation of South Africa’s urban spatial economy.