Presentation to the Sport and Recreation Portfolio Committee 24 February 2015

Constitution The Constitution of the Republic of South Africa, Act 108 of 1996 places exclusive legislative competence of beaches, amusement facilities, local sport facilities and municipal parks and recreation on provinces Thus provinces should pass legislation governing sport and recreation matters within the province However, Schedule 5 part B articulates that local government is the core delivery arm of these services and can enact by–laws to regulate them. Thus grant funding is provided to local government for sport and recreation facilities

Evolution of Grant System Water Serv. Proj. 3

MIG The MIG was started in 2004/05, through the merger of: Consolidated Municipal Infrastructure Programme, Local Economic Development Fund, Water Services Capital Grant, Community Based Public Works Programme, Building for Sports & Recreation Programme and Urban Transport Grant.

MIG The Municipal Infrastructure Grant (MIG) programme is the largest local government infrastructure development funding programme in South Africa The programme was introduced as part of major reforms implemented by government to improve service delivery in a coordinated manner (that involves all government spheres) The Department of Cooperative Governance manages the MIG by exercising its mandate to foster cooperative governance and to develop capacity in the local government sphere.

15% within MIG for sports facilities The construction of municipal sports facilities has been funded as part of the Public Municipal Service Infrastructure component (P-component) of the MIG – which accounts for 15 per cent of the total value of the MIG Originally the P-component was intended to fund community infrastructure, including sports facilities, community centers, parks, cemeteries and other community amenities In 2011/12 this funding was ring-fenced for sport infrastructure only Municipalities may also allocate funding from their equitable share and own sources of revenue to complement MIG or for maintenance of sport facilities

MIG allocations to Sport and Recreation in 2014/15 ProvinceWater and Sanitation (%) Roads and Storm Water (%) Solid Waste (%) Public facilities (%) Sport Facilities (%) Communit y Street lighthing (%) Eastern Cape Free State Gauteng KwaZulu Natal Limpopo Mpumalanga Northern Cape North West Western Cape TOTAL

Summary of MIG Expenditure by Province as at end January 2015 (2014/15) Province Allocated (R'000) Transferred to date Expenditure to date Expenditure as % allocation Expenditure as % transferred Balance Unspent Eastern Cape %87.34% Free State %62.63% Gauteng %68.07% KwaZulu Natal %72.87% Limpopo %61.98% Mpumalanga %77.39% Northern Cape %80.83% North West %78.53% Western Cape %75.51% TOTAL %74.45%

ProvinceWater and Sanitation (%) Roads and Storm Water (%) Solid Waste (%) Public facilities (%) Sport Facilities (%) Community Street lighting (%) Eastern Cape Free State Gauteng KwaZulu Natal Limpopo Mpumalanga Northern Cape North West Western Cape TOTAL MIG Expenditure per Sector as at 31 January 2015

MIG Allocation, Beneficiaries and Expenditure for sports facilities for 2014/15 Province Sport Facilities Budget Allocation by Municipalities Planned Households Expenditure Eastern Cape Free State Gauteng ,727 35,631,665 KwaZulu Natal Limpopo Mpumalanga Northern Cape North West Western Cape TOTAL

Challenges The following challenges are generic to the MIG programme: Inadequate planning and communication of sector priorities by sector departments, in the context of Integrated Development Planning Lack of Intergovernmental cooperation (municipalities, provinces, and sector departments involvement in MIG implementation) Lack of capacity to manage MIG projects (Project Management Units) Appointing service providers or contractors who cannot deliver Late payment of service providers Delays in approval of projects and budgets by Councils Delays in Technical reports and Environmental Impact Assessment (sector departments) Use of MIG funds for operational budget pressures

The proposed MIG Framework for 2015/16 is that “The P- component of the MIG formula (described in part 5 of Annexure W1 to the Division of Revenue Bill) amounts to 15 per cent of the MIG and must be used for municipal sport facilities only” Proposal for the P-component over the MTEF: R 2,058,114,300 in 14/15 R 2,146,928,250 in 15/16 R 2,280,056,400 in 16/17 Only Local Municipalities have a P-component MIG funding for Districts is only allowed for water and sanitation - Municipal allocations are not made to District Municipalities as MIG funding is only allowed for water and sanitation. Proposed MIG Framework 2015/16

COGTA support to municipalities COGTA’s main responsibility is oversight of MIG processes and procedures. This role includes: promoting sound inter governmental relations coordination between stakeholders coordination of stakeholder support to municipalities coordination of stakeholder participation in MIG project pre- implementation and implementation phases COGTA SALGA does not have a monitoring role on the spending of 15% MIG allocation – this is COGTA’s role

The SALGA Mandate Represent Support Advise SALGA’s key roles Employer Body Knowledge hub (intelligence) to support the roles above Profile

Employer Body Act as an employer body representing all municipal members and, by agreement, associate members. The Voice of Local Government Support and advise our members on a range of issues to assist effective execution of their mandate. Build the capacity of the municipality as an institution as well as leadership and technical capacity of both Councillors and Officials. Lobby, advocate, protect and represent the interest of local government at relevant structures and platforms. Transform local government to enable it to fulfil its developmental mandate. SALGA Mandate Lobby, Advocate & Represent Support & Advice Capacity Building Build the profile and image of local government within South Africa as well as outside the country. Strategic Profiling Serve as the custodian of local government intelligence and facilitate inter- municipal peer learning Knowledge & Information Sharing The Voice of Local Government 15 The SALGA Mandate

Consult and represent municipalities While the impact of ring-fencing 15% of MIG for sport infrastructure is yet to be assessed – initial consultations with municipalities during 2011 found that municipalities supported the creation of a separate grant for municipal sport infrastructure Such a grant would look specifically into backlogs of sport infrastructure in municipalities especially rural areas During the Infrastructure Grant Review consultations of 2014 municipalities indicated a preference for consolidated funding which would rationalise the number of grants a municipality receives and have to report against

Infrastructure Grant Review The review resulted from concerns regarding underspending and inefficiency in local government infrastructure grants, and the proliferation of new grants in the system as a whole The Budget Forum committed National Treasury to undertake a thorough review of these grants. (ToR were endorsed by the BF in October 2013 and the Review’s recommendations were presented to the BF in The Review is a collaborative effort between the National Treasury, the Department of Cooperative Governance (DCoG), theI Financial and Fiscal Commission (FFC), the South African Local Government Association (SALGA), and the Department of Planning Monitoring and Evaluation (DPME). The Review engaged other stakeholders at national and local government levels throughout the process to ensure full consultation.

Following literature reviews, policy analysis and consultation with all stakeholders, 8 principles agreed upon: 1)Respect the Constitutional Mandates of different spheres 2)Provide for Predictability and Stability 3)Encourage Transparency, Simplicity and Accountability 4)Integrate a Variety of Funding Sources and Aims 5)Be Sustainable and Unlock Growth 6)Involve Supportive National Departments 7)Reflect the Approach of Differentiation 8)Reinforce practices that optimise the impact of grants and minimise negative spill-over or perverse unintended effects All reforms relating to the local government infrastructure grant system must therefore adhere to and be guided by these principles Principles

Key outcomes of the review 1.Grant Structure Greater asymmetry and differentiation in the grant system; proposals address service delivery and locational challenges applicable to the different types of municipalities Rationalisation in the number of grants each municipality receives and municipal discretion (i.e. consolidated, not ring-fenced funding) is key 2.Asset Management and Planning Incentivising and enforcing improved pre-planning and asset management over the life-cycle of grant-funded infrastructure 3.Management of the Grant System A rationalised, more functional and accountable reporting system Clearer roles for national government departments even if not grant administrators; NT to manage the grant system holistically, then grant administrators and sector departments to support and monitor municipal implementation of grants

Grant structure summary (2 of 2) Metros and Emerging cities Future: Consolidate INEP with USDG (+ MIG for secondary/ emerging cities) into Integrated Urban Development Grant, administered by DCoG. Towns Future: Asset management reforms. INEP into MIG in long-term WSA Districts (Rural) 2015: Rationalise water and sanitation grants administered by DWS into one W&S grant Future: Review possible extension of general infrastructure grant to other district municipalities depending on institutional role envisaged for districts and NDP’s call for regionalisation Non-WSA Locals (Rural) Future: Ensure need for sector oversight is reduced as capacity improves and movement is towards more general funding

Asset management Key Problem New infrastructure at expense of sustainable investment in existing infrastructure; maintenance funding not prioritised by municipalities Recommendation 1.Encourage grant investment in renewal of existing assets (rather than always creating new) and incentivise improved asset management 2.No extra funds for maintenance (LGES already does; perverse incentive) but emphasise importance (like DCoG’s 7% rule in Back to Basics)

National administration Key Problem Limited data on grant performance/outcomes with limited analytical use Uncontrolled proliferation of new grants (esp. indirect); old grants are not phased-out Recommendation 1.Streamline & standardise reporting of grants to improve accountability 2.Stricter requirements for introduction of new indirect & ad-hoc grants; regular reviews to ensure holistic/strategic management of system

Time line for reforms 2015 Budget Smaller changes (i.e. combine public transport grants, begin process of reconfiguring water and sanitation grants) implemented immediately Signal medium and long term direction of reforms and findings of Review 2016 MTEF Phase-in medium-term reforms to avoid disruption to planning at municipal level Begin implementation towards longer term vision On-going Regular (every 3-5 year) reviews of LG infrastructure grant system to continue longer-term reforms