26 November 2024

The urgency to resolve local government financial limitations and sustainability to meet the needs of the community

The 2024 Medium Term Budget Policy Statement provides an insightful reflection of the determination of the ANC-led Government of National Unity to continue with the strides that have been made since the democratic dispensation. The African National Congress has always committed itself to serving the people of this nation, and even today, with changed conditions, we remain loyal to our nation’s call to lead in the interest of the marginalised, workers and the poor.

The President, in his opening of Parliament address, outlined the three priorities of the seventh administration. They respond to the primary imperative of the National Development Plan, which sets a bold vision to transform our society and country.

Addressing the injustices of the past and ensuring we redress them is a fundamental basis of our progressive tax system, but inequality continues to persist.

This calls for the government to ensure that it aligns its national planning system with set priorities, and fiscal and monetary policy should support those objectives.

The Finalisation of the development of the Medium Term Development Plan will be a critical milestone of the seventh administration as it will direct all organs of state to prioritise key areas to achieve inclusive growth, reduce poverty and tackle the cost of living, and build an ethical and capable developmental state.

These priorities and key outcome indicators from the Medium Term Development Plan should be mainstreamed in all spheres. Local government long-term and medium-term planning should be embedded at a local level, responding to different spatial developmental needs.

We support the MTBPS priorities

• to stabilise government debt and
• maintain higher levels of investment by directing a growing share of public spending towards capital projects;
• to protect critical services in the context of constrained budget resources and
• manage the public wage bill.

Honourable Minister, we agree with the President when he alluded in the Opening of Parliament that:

“To achieve rapid, inclusive growth, we need to fix our struggling municipalities. Growth happens at a local level, where people live and work.

Our municipalities must become both providers of social services and facilitators of inclusive economic growth. They must work to attract investment. “

Without an effective local government system, macroeconomic stability is threatened due to social and economic constraints that emerge out of inefficiencies.

We must review the local government white paper to take the different economic contexts which impact the viability of municipalities of different categories. White paper assumptions must be based on existing economic and social data. Our institutional support and financing approach has to be differentiated if we are to tackle the legacy of apartheid spatial development.

The commitment to ensuring that the institutional structure and funding model for local government is fit for purpose and that municipalities are financially and operationally sustainable will have a lasting impact on improving our governance system.

This will require a strategy that enables the allocation of sufficient human and financial resources at a local level which is closest to the people. Over the last 25 years of local government, we have transitioned municipalities from institutions that began in small offices with no resources or local revenue base with the establishment of Transitional Councils in 1995 to the establishment of local government as we know it in 2000. We have major local government institutions which we should build upon. The constitution of South Africa assets a single public service with different concurrent functions.

We welcome the archievements of the first phase of Operation Vulindlela such as the large pipeline of about 22,500 megawatts of private sector investments in renewable energy projects and a 50 per cent reduction in the cost of data for a 1.5GB bundle and other focus areas.

We support the focus on local government in the second phase of Operation Vulindlela, which is critical to enhancing the capability of the sphere of government ot effectively provide services. We need to strengthen the District Development Model implementation to enhance intergovernmental relations and to mobilise public and private resources for local economic development.

One of the risks impacting the local sphere of government is the debt problem which impact municipalities and also impacts institutions which owe Eskom, Water Boards and other debtors. A comprehensive approach is required to deal with the debts amongst state institutions and also debt owed by businesses and households.

We must continue to strengthen the indigent programme of government, which provides free basic services for the poor, but we must ensure that all South Africans who can afford to pay for various public services should do so. This is linked to the ability of municipalities to be sustainable. A review of the division of revenue to support local government is another key element to improve the funding of local government.

We welcome the progress made between March and August 2024 of compliance with the Eskom. Municipal Debt relief conditions by municipalities improved from 55 per cent to 76 per cent, aided by the National Treasury, Provincial Treasuries, and the Municipal Finance Improvement Programme, with Rand West City as the first municipality to benefit from a one-third debt write-off. We call on all municipalities to ensure compliance and lower their financial risks.

To achieve this goal, we must heed the call of the President to fix our struggling municipalities. We must also focus on strengthening municipalities which are performing well as they serve as a critical base to accelerate economic growth and development.

For local government to work, we must place the people at the centre of decisionmaking and implementation. We must ask ourselves critical questions about the impact of our Metropolitan municipalities in stimulating and driving economic growth. Our cities remain nodes of potential economic growth, and by supporting the industrialisation efforts of provinces with significant primary sectors, we will enable economic development to be distributed across the country.

We recognise that the majority of the adjustments to the division of revenue are to respond to climate change disasters and welcome efforts to enhance their capacity to manage a multi-layered disaster risk finance approach.