Comments on the 2013 DoRB Standing and Select Committees on Appropriations 6 March 2012 By Councillor Loyiso Nkosiyane (SALGA National Municipal Finance Working Group)

Welcome the overall sentiment of the Budget against a difficult economic landscape The Budget is developmental – supports growth in municipal service delivery reflected in the 2011 Census – supports the National Development Plan Introduction

1. SALGA Mandate 2. SALGA support to municipalities 3. Feedback on 2012 Recommendations of the Committees 4. General Comments on 2013 MTEF 5. Specific Comments on LG Grants i. Local Government Equitable Share (LGES) ii. General comments on Conditional Grants iii. Infrastructure Grants 6. Conclusion Outline

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 the knowledge hub and centre of local government intelligence for the sector. Knowledge & Information Sharing The Voice of Local Government SALGA MANDATE

Engagement with municipalities on poor audit outcomes – SALGA engaged political and administrative leadership of 75 municipalities in October 2012 – Municipalities signed pledges to improve and SALGA is following up Credit Control and Debtors Management Policy Workshops (in partnership with DCoG) – Developed a guideline for the improvement of credit control and debtors management policies – Conducted 7 workshops covering 120 municipalities from all provinces SALGA Municipal Finance Weeks – 6 provincial workshops – Focused on Credit Control, improving financial management and audit outcomes District Area Finance Forums and CFO Forums – Convened in most provinces to deliberate on challenges and to share best practices in municipal financial management SALGA Support to Municipalities

The Select Committee on Appropriations recommended on 24 April 2012 that: – SALGA should assist all municipalities in utilising a part of their existing infrastructure grant to address the challenge of rolling out existing infrastructure. – SALGA should take it upon itself to clarify purposes of grants to municipalities, why certain grants have been revised upwards or downwards, when business plans should be submitted and most importantly the reporting procedures. This should improve the municipalities’ awareness of grants. – SALGA should make every effort to assist municipalities to spend their funds effectively and efficiently and in compliance with grant frameworks Recommendations of the Committees

SALGA Responses – SALGA and NT engaged on the Committee’s recommendations and many issues were clarified and cooperation processes fortified – SALGA participated in development of the new LGES which clearly provides for repairs and maintenance of infrastructure – SALGA developed a proposal for self-funding of refurbishment of pre-1994 infrastructure in urban areas and will table at Budget Forum this year – SALGA participated in DCoG provincial workshops on 2012 DoRA where awareness was raised on legislative provisions and compliance encouraged – 2012 DoRA Brochure Aim is to inform municipalities of the purpose and conditions of national grants and to further encourage compliance and improved spending 2012 Recommendations of the Committees (continue)

SALGA welcomes the R12.1 billion added to LG allocations over the 2013 MTEF SALGA notes that additional funding is made available for: – anticipated increases in the costs of basic services in outer years of 2013 MTEF – increase access to clean water – integrated city urban development and public transport networks – hosting the 2013 African Nations Championship General Comments on 2013 MTEF

Local Government Equitable Share Conditional Grants − General comments − Infrastructure Grants Specific Comments on LG Grants

Additional resources of R5.4 billion over the 2013 MTEF is noted  represents a real increase over average inflation, but  costs of administering indigent support programmes often exceeds average inflation SALGA welcomes the new formula  an improvement from the current one as it promotes more transparency, are more simpler and makes provision for more frequent updating of data which is crucial to reflect changes in municipalities  a particularly positive factor is that the new formula provides funding for an expanded basket of municipal services However  need to update estimates of basic services costs for the 2014 Budget  the updated cost estimates must be used to evaluate local government’s share of the vertical division of revenue Equitable Share

Conditional Grants − General comments − Infrastructure Grants Specific Comments on LG Grants

SALGA notes the additional R3.8 billion for direct transfers and R4.9 billion for in-direct transfers to municipalities, mainly for: – expansion of household access to water and electricity – bulk water and sanitation infrastructure – integrated city development – infrastructure skills development Changes to grants and introduction of new ones are noted General Concerns – need a more clearer and coherent strategy on how infrastructure delivery in LG will be driven – identify which departments are strategically best suited to deliver – changes should always streamline the reporting burden on municipalities General comments on Conditional Grants

Municipal Infrastructure Grant SALGA notes – updating with 2011 Census – top slicing to create water infrastructure grant – separation from Rural Household Infrastructure Grant Growth of only 3.5% per year over MTEF is minimal against huge demand for: – roads infrastructure and rehabilitation – development of micro-enterprises for job creation Infrastructure Grants

Conclusion SALGA notes the fiscal consolidation underpinning the 2013 Budget Municipal revenues will still be under pressure during 2013/14 Greater involvement of OLG in the budget process is acknowledged and SALGA will increase effort to actively participate SALGA will continue participating in the review of the LG Fiscal framework and ensure that emphasis is given to: – address the vertical division of revenue – explore additional sources of own revenue for LG – address unfunded mandates in health, libraries, museums, roads