1. 2007 BUDGET: FISCAL SPACE FOR MUNICIPAL ACTION
THE EFFECTIVE USE OF AVAILABLE MUNICIPAL RESOURCES
By Liziwe Dyasi
DBSA
23rd March 2007

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

3. 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

4. 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%

5. 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%

6. 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)

7. 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

8. 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

9. 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

10. 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

11. THANK YOU