Governance and leadership are recognised as central to health system development in low- and middle-income countries, yet few existing studies consider the influence of multi-level governance systems. South Africa is one of many (quasi-)federal states. Provincial governments have responsibility for managing health care delivery within national policy frameworks and norms. The early post-apartheid period saw country-wide efforts to address the apartheid legacy of health system inequity and inefficiency, but health system transformation subsequently stalled in many provinces. In contrast, the Western Cape provincial health department sustained service delivery reform and strengthened management processes over the period 1994-2016. This department can be considered a 'pocket of relative bureaucratic effectiveness' (POE): an organisational entity that, compared to others, is relatively effective in carrying out its functions in pursuit of the public good. This paper considers what factors enabled the development of the Western Cape health system in the period 1994-2016. Two phases of data collection entailed document review, participatory workshops, 43 in-depth interviews with purposively selected key informants from inside and outside the Western Cape, and a structured survey testing initial insights (response rate 42%). Analysis included triangulation across data sets, comparison between the Western Cape and other provincial experience and deeper reflection on these experiences drawing on POE theory and public administration literature. The analysis highlights the Western Cape experience of stable and astute sub-national governance and leadership and the deepening of administrative and technical capacity over time - within a specific provincial historical and political economy context that sustained the separation of political and administrative powers. Multi-level governance systems can create the space for sub-national POEs to emerge in their mediation of wider political economy forces, generating spaces for skilled reform leaders to act in the public interest, support the emergence of distributed leadership and develop robust management processes.