2007 BUDGET: FISCAL SPACE FOR MUNICIPAL ACTION THE EFFECTIVE USE OF AVAILABLE MUNICIPAL RESOURCES By Liziwe Dyasi DBSA 23rd March 2007

OUTLINE BACKGROUND TRENDS IN IGTS TRENDS IN TOTAL REVENUE FISCAL SPACE EFFECTIVE RESOURCE USE REASONS FOR INEFFECTIVE USE IMPLICATIONS OF OUTSOURCING CONCLUDING REMARKS

BACKGROUND Constitutional Provisions White Paper on Local Government Objectives of Local Government Powers and Functions of Local Government White Paper on Local Government Definition of “Developmental Local Government” Systems Act Mechanisms to achieve effective and efficient use of municipal resources Municipal Finance Management Act Efficient and Effective Use of Municipal Resources

TRENDS IN IGTS 05/06 06/07 07/08 08/09 09/10 LES 25,6% 87,3% 14,5% 15% 23,8% INFRASTRUCTURE 16,1% 54,4% 36,7% -6,6% CAPACITY GRANTS -14,9% 29,1% -11,3% -46,6%

TRENDS IN TOTAL REVENUE 05/06 06/07 07/08 AVE LES 25,6% 87,3% 14,5% 13.66% INFRASTRUCTURE 16,1% 15% 54,4% 28.50% CAPACITY GRANTS -14,9% 29,1% -11,3% 0.97% OWN REVENUE 29.90% -2.68% 5.07% 2.72%

FISCAL SPACE Budget Speech 2007: “Much of our economic and fiscal policies has (sic) been aimed at increasing fiscal space and reducing our vulnerability to financial instability” (Minister Trevor Manuel)

EFFECTIVE RESOURCE USE “Public goals may be achieved through non-public means” (Bert Helmsing) Public delivery attributes: Decisions are through bureaucratic decision-making processes – accountability Chains of hierarchy are basis for implementation and delivery Decisions are enforced top-down Performance of public service depends on public management and capability of human resources Legislative and fiscal constraints – sometimes cause ineffectiveness and inefficiency

Reasons for Ineffective Use Inadequate remuneration to attract and retain quality skills; Strigent labour relations; Frequent changes in goals of programmes Insufficient resources to meet goals Lack of incentives for effectiveness and efficiency Lack of M & E for effective programmes

Contracting Out of Public Services Does it lead to effective use of resources? Complicating factors to contracts: Limited Information; and Bounded rationality Shirking Level of monitoring

So what? Need to curb leakage of targeted public resources Strengthen institutional capacity Strengthen incentives for effective and efficient use Strengthen citizen’s capacity to exercise control over effective use of resources

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