1. www.salga.org.za 1 Submission and Comments On The 2015 MTBPS Standing and Select Committees on Appropriations 11 November 2015 1

2. www.salga.org.za The challenging economic times our country finds itself in have an acute reflection in local communities and in the overall performance of local government Whilst acknowledging and appreciating the intent of the MTBPS to deal with our socio-economic challenges, more reflection and creative thinking by all is necessary so that we can collectively overcome that which imposes on us a trajectory that inhibits the meeting of our desired developmental goals as articulated in the National Development Plan Introduction 2

3. www.salga.org.za The MTBPS paints a picture of decreasing GDP growth because of global and domestic factors –Next period is likely to see more pressure in the spending of the limited available resources by all –This will also have greater implications for increased accountability and consequences for the management of these limited resources This could be demonstrated for example in limited tolerance for unauthorised, irregular and fruitless expenditure Lobby for increased funding for local government = more accountability and improved audit (and service delivery) outcomes Background 3

4. www.salga.org.za The trends in the MTBPS indicate still a limited overall funding for local government compared to the two other spheres –More pressure for collection of own revenue as competition for limited resources increases among three spheres Division of Revenue, 2015/16 – 2018/19 Background 4 2015/162016/172017/182018/19 R billion National49.0%47.7%47.3%47.2% Provincial42.0%43.1%43.5%43.4% Local Government 9.0%9.2%9.1%9.4%

5. www.salga.org.za –We participated in the 2 Budget Forums that contributed in the crafting of the MTBPS as required by the Act While the June 8 Winter Budget forum focused on high-level policy and trends issues, the 29 September Spring Budget Forum focused itself on the figures, some of which are reflected in the MTBPS The technical canvassing of the issues between NT, CoGTA, FFC and Salga does assist in clarifying issues even if we do not necessarily agree on everything –Upfront though we want to acknowledge that some steady progress is being made in some policy matters such as Conditional Grants Review; Costing of the Basket of Services, Division of Fiscal Powers and Functions and others – this still needs to be reflected in the figures Background 5

6. www.salga.org.za -MTBPS on grants review – some positives we note -Merging the water and sanitation grants -Using grants to improve sustainable asset management -Changing the way roads projects are selected and funding targeted -Creating a MIG-Cities (or MIG-2) with new planning requirements for secondary cities -Merging urban grants (USDG, NDPG, INEP etc.) over the MTEF -Reworking community services funding in the MIG Disappointed though at the dis-continuation of the MHSCG and the 3% instead of 5% window in USDG Grants Review 6

7. www.salga.org.za -We note and appreciate as well the following: -Municipal Demarcation Grant -Issue of sufficiency is a matter that the committees could interrogate as the allocation is far shorter than we had projected – The provision for a once off gratuity for outgoing councillors is also noted Modalities for the management and distribution of this still to be worked out with NT and Cogta – Process to resolve the issue of unfunded/underfunded mandates through the finalization of the Fiscal Powers and Functions framework The outcome of this process will have a major bearing on the allocation of budgets between line departments and municipalities who perform certain functions Other MTBPS Positives 7

8. www.salga.org.za MTBPS and the BIG ELEPHANTS i.Budget and Cash Flow issues i.Non-payment of creditors, uncollected revenue (R106 bn), solvency issues ii.Migration and Informal Settlements i.Demand for services, inability to pay, ‘delivery protests’ iii.Infrastructure pressures i.Electricity theft, water leaks, infrastructure maintenance and refurbishment challenges iv.Financial viability of municipalities v.Support beyond demarcation and in other not as yet affected areas More ongoing work on these is necessary and MTBPS falling short of boldly tackling these Some Issues To Focus Upon 8

9. www.salga.org.za Vertical division of Revenue and New Income Streams Additional revenue raised capacity of LG needs to be pursued. Although the Local Government Fiscal Powers and Borrowings Act provides for a range of measures, Treasury has been very reluctant to support any of these, including Local Business Tax: As a dedicated revenue stream for funding Economic Infrastructure (Replacement of RSC Levy) Direct revenue source for Roads Infrastructure (Municipal) – possible surcharge on Vehicle License Fee 9

10. www.salga.org.za Vertical division of Revenue and New Income Streams –Explore Financial Instruments including Borrowings (Loans), Bond Market – in the context of “Pool Financing” between and amongst stronger Municipalities (Gauteng City Region being a prime example) –Create a legal basis (with Division of Revenue Act) to enable leveraging of Equitable Share to increase / enhance financial credibility and borrowing capacity of Local Sphere (Municipalities) –Regulatory Framework for Public Private Partnerships (PPP’s) to be revised to ensure greater efficiency of process without digressing from principle of State regulation of pricing, norms and standards, accountability, sound financial principles, value for money etc. 10

11. www.salga.org.za National Collections Agency –Municipal revenue collection, credit control and cash flow management remain a big challenge –Legislation, infrastructure and systems to support increased and effective debt collection for Municipalities as part of building municipal financial viability –If circumstance places municipalities in a situation where they generate limited own revenue – national fiscus must compensate accordingly 11 Some Issues To Focus Upon

12. www.salga.org.za Fiscal and other impacts of Legislation (Constitutional Obligations and Role of FFC) -AARTO (Financial Impact) -Public Service Amendment (IT Environment) –Impact of SPLUMA implementation (Fiscal and Technical capacity) Technical and other resource capacity constraints –SCoA impact on audit outcomes Technical readiness of non-pilot municipalities –SCOA and AG to oversight implementation readiness (due diligence reports from NT) Some Issues To Focus Upon 12

13. www.salga.org.za LG Support Infrastructure and Models LG elections to raise new challenges and requirements – new personnel, capacity issues, etc. NT study – period of great ‘instability’ – 6 months before elections and until 18 months afterwards Need for clear municipal monitoring and support mechanisms by NT, CoGTA, Provinces, etc. –Gaps, resources, coordination, support model/s –Differentiated and targeted interventions for Cities and other categories Some Issues To Focus Upon 13

14. www.salga.org.za DoRA management Eskom untenable business practices e.g. –Billing after 15 days –Prime plus 5% interest –Debts exceeding capital amounts –Debts not prescribing after 3 years –Refusal to sign Service Delivery Agreements –Reluctance (refusal) to enforce municipal credit control in areas where they reticulate, etc. Escalation of the issue at a political level through Minister of Finance and Presidency Some Issues To Focus Upon 14

15. www.salga.org.za DoRA Frameworks Engagement on the conditions of the grants is key (some create onerous burden on municipalities – e.g. duplicated reporting requirements) Monitor the process of Infrastructure Grants Review – key to get key sector departments on board, e.g. Sports and DHS Monitor changing of grant terms e.g. MSIG, USDG, etc. Enforcement of grants – e.g. MHSCG Some Issues To Focus Upon 15

16. www.salga.org.za Past three years have highlighted a number of possibilities and challenges A pragmatic approach to resolving issues identified necessary while building the requisite capacity and providing the necessary resources Creative thinking necessary in navigating the turbulent financial and economic environment The viability of the local government sphere important in the transformation and developmental efforts of our country. Let us build up on the MTBPS presented while building resilient and viable municipalities Conclusion 16

17. www.salga.org.za Thank You! 17