A lack of management capacity has been identified as the key stumbling block to attaining the goals of health for all in South Africa. As part of the overall management development process, this research aimed to identify the skills important for health services management and to evaluate managers' self-assessed proficiency in each of these skills. We also examined the impact of past training on perceived competency levels. A cross-sectional survey using a self-administered questionnaire was conducted among 404 hospital managers in the South African public and private sectors. Respondents were asked to rate the level of importance that each proposed competency had in their job and to indicate their proficiency in each skill. The results of this study show that both the public and private sector managers rated competencies related to 'people management', 'self-management' and 'task-related skills' highest, followed by 'strategic planning' and 'health delivery', respectively. The largest differences between mean importance rating and mean skill rating for public sector managers were for people management skills, task-related skills and self-management skills. The largest deficits for private sector managers were for people management skills, self-management skills and health delivery skills. Informal management development programmes were found to be more valuable in improving management skills. These findings reflect the reality of the local health service environment and the needs of health managers. It will be useful in the conceptualisation, design and delivery of health management programmes aimed at enhancing current and future management and leadership capacity in the health sector in South Africa.