Gigaba's budget plans leave municipalities out of pocket

Finance Minister Malusi Gigaba during his Medium-term Budget speech in parliament in Cape Town on Wednesday Picture: Esa Alexander. © The Times
Finance Minister Malusi Gigaba during his Medium-term Budget speech in parliament in Cape Town on Wednesday Picture: Esa Alexander. © The Times

The budget allocations made by National Treasury to local government are not enough to enable municipalities to fulfill their constitutional obligations. Actually‚ in the current economic conditions‚ it’s highly unlikely that municipalities across the country can all provide basic services to the people.

This is the cry from the SA Local Government Association (Salga) after the Medium-Term Budget Policy Statement released by National Treasury last week.

In the MTBPS presented by Finance Minister Malusi Gigaba in Parliament last week‚ National Treasury’s contribution to local government in equitable share and conditional grants is projected to grow from 9.1% of the total budget in the 2018/19 financial year to 9.3% in the 2020/21 financial year.

The equitable share will increase from R62.7-billion to R75.7-billion in the same period‚ while conditional grants will surge from R46.4-billion to R53.3-billion.

Simphiwe Dzengwa‚ executive director of municipal finances at the SA Local Government Association‚ said the budget had a direct impact on the delivery of basic services.

“Local government is the most underfunded sphere‚ despite all the challenges and the responsibilities it carries … There is no real growth in the equitable share. What is you see is just an inflation adjustment‚” Dzengwa said.

Municipalities urge review of Gigaba's budget allocation

“This is further complicated by the fact that the levels of unemployment in the country are very high. With the economy not growing‚ many people cannot afford to pay for municipal services‚ yet they demand more from municipalities.

“Local government cannot even collect what it is meant to collect because of the current economic climate. The latest figures show R128-billion debt‚ which is money owed by businesses‚ households and all who use municipal services. The bulk of this debt is from households who cannot afford to pay‚” Dzengwa explained.

He said there needs to be a review of the funding allocated to local government from the fiscus.

There is another factor that is impeding the funds available to local government – the credit rating of the country.

“Because South Africa as a sovereign [state] was downgraded‚ it meant that 10 of the metros that are rated were affected by that. When you are downgraded‚ it means that the cost of borrowing is higher. You are going to have a challenge as to how do you put infrastructure that is so in demand and the backlogs‚” he said.

The number of indigent households was rising in the country‚ putting more pressure on revenue levels.

“We are saying‚ instead of complaining that the 9.2% is not enough‚ we need to do an exercise that will determine how much will be enough for local government. We then need to debate as to where must the money come from.

“We want to get to this exercise right away‚ collaborating with the Finance and Fiscus Commission‚ so that by the next financial year‚ we have a document on the table that makes it clear how much is needed by local government. Our target is that by June next year‚ when we have the winter budget forum‚ the large chunk of that work is done.”

Danga Mughogho‚ programme manager at the SA Cities Network said: “Although the statistics show that 70% of the country’s population lives in urban areas ... only 10% of the budget is allocated to local government (which) may suggest a misallocation of priorities. One has to look at the allocation in terms of the mandates of the different spheres of government.”

“Merely to say that‚ as the Integrated Urban Development Framework is implemented‚ there may be greater impetus provided to revisit the priority accorded to local government in fiscal terms. The SA Cities Network is commissioning research on what we are calling the funding gap between city revenue and city mandates‚ that will be coming out towards the end of next year.”