EEHCStrategy

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INTERGOVERNMENTAL FISCAL REVIEW 2003 dplg
INPUT TO SELECT COMMITTEE ON FINANCE May 14,
2003


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CHALLENGES IDENTIFIED BY dplg AT THE PUBLIC
HEARINGS ON THE DIVISION OF REVENUE BILL

• Planning and budgeting
• ? Intergovernmental Relations
• ? Targeted Support to Municipalities
• ? Budget Certainty, Predictability and alignment
  of IDPs
• Disbursements, Expenditure and Reporting
• ? Strengthening monitoring of conditional grants

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CHALLENGES IDENTIFIED BY dplg AT THE PUBLIC
HEARINGS ON THE DIVISION OF REVENUE BILL

• Management Information Systems
• ? Clear definition of role of different spheres
  with regard to reporting and information systems
• Developing Treasury Capabilities of
  Municipalities
• ? Targeted at weaker municipalities

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POLICY BACKGROUND

• Building a developmental state
• ? Unitary state with clear national development
  objectives
• ? Strong state with capacity to address
  developmental challenges
• ?Three spheres work in an integrated, cooperative
  and complementary manner
• ?Ability to adapt to address new/emerging
  challenges

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CHAPTER 2TRENDS IN PROVINCIAL BUDGETS

• Provinces have responsibility for
• Social Services (health, education, welfare)
• Housing
• Provincial Roads
• Agriculture Support
• Environment and tourism

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PROVINCIAL REVENUE

• Provinces generate very little own revenue
• Major source of revenue is national transfers
• Major source of own revenue is road traffic fees
• Other own revenue sources
• Patient fees
• Gambling fees
• Horseracing fees
• Casinos
• Interest

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PROVINCIAL EXPENDITURE

• Real Growth of 7,1 in 2003/04 and real average
  annual growth of 5,5 over 2003/04 MTEF in social
  services expenditure
• Share of social development increasing while
  share of education and health decreasing
• Steady decline in personnel expenditure from
  59,1 in 1999/00 to 51,6 in 2002/03 and
  projected to drop to 46,4 by 2005/06
• Overall, improvement in provincial spending

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KEY CHALLENGES IDENTIFIED IN REVIEW

• Ensuring that
• Growing budgets are spent efficiently and
  effectively
• Quality services are delivered

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ADDITIONAL CHALLENGES IDENTIFIED BY dplg

• Planning
• ? Integrated planning and alignment between
  provincial and national departments
• ? Alignment of integrated planning to budgeting
• Implementation
• ? Enhancement of investment in socio-economic
  infrastructure

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ADDITIONAL CHALLENGES IDENTIFIED BY dplg

• Monitoring and Evaluation
• ?Need for national departments to monitor
  non-financial performance of provinces
• ?Need for provinces to monitor performance of
  municipalities, especially with regard to roll
  out of free basic services

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PCC RESOLUTIONS ON STATE OF PROVINCIAL FINANCES

• Premiers to take corrective measures necessary to
  improve spending capacity and prevent fiscal
  dumping
• Investigation of challenges with regard to low
  capital expenditure spending and encouraging of
  private sector participation

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PCC RESOLUTIONS ON STATE OF PROVINCIAL FINANCES

• Introduction of necessary interventions to build
  capacity, develop skills and improve integrated
  planning to improve capital expenditure
• National Treasury to provide reasons for and an
  analysis of rapid take-up in social disability
  grant

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KEY dplg INITIATIVES

• Policy Framework on Intergovernmental Relations
  and Intergovernmental Relations Bill
• ? Platform for inter-sphere planning and
  budgeting
• ?Focus on intergovernmental structures and
  intergovernmental dispute resolution
• Policy Framework for Assignment of Powers and
  Functions to Local Government
• ? Provides guidelines about what assignments are,
  when they should be made and how they should be
  managed

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KEY dplg INITIATIVES

• Review of Schedules 4 and 5 of the Constitution
• ? Concrete proposals on best allocation of powers
  and functions across the three spheres of
  government
• Roll out of National Planning Framework
• ? Ensure identification of strategic priorities
  that should inform financial and medium-term
  expenditure frameworks

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CHAPTER 3LOCAL GOVERNMENT BUDGET TRENDS

• Local government has responsibility for
• Water
• Sanitation
• Electriciy
• Refuse removal
• Roads
• Stormwater drainange
• Municipal health
• Firefighting services

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MUNICIPAL PROFILE

• 284 municipalities as of December 5, 2000,
  (reduced from over 1,200 in 1993 and 843 in
  1996)
• ? 6 Category A (metropolitan)
• ? 231 Category B (local)
• ? 47 Category C (district)

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MUNICIPAL BUDGETS

• Total for 2002/03 R74,5 billion (15,7 more than
  2001/02)
• Capital budgets R13,1 billion
• Operating budgets R61,4 billion
• Share of different categories
• Category A 64
• Category B 33
• Category C 4

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MUNICIPAL REVENUE

• Own revenue
• User charges for water and electricity (Category
  A, B and C)
• Property Rates (Category A and B)
• Regional Services Council (RSC) levies (Category
  A and C)
• Other user charges
• Grants from National and Provincial government

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MUNICIPAL EXPENDITURE

• Operating expenditure
• Personnel costs continue to form largest share
  R19,8 billion (1 increase from 31 in 1999/00 to
  32 in 2002/03)
• Capital expenditure
• 82 for general infrastructure (largest
  proportion for housing, water reservoirs and
  reticulation, roads, bridges, pavements, and
  electricity distribution)
• Actual expenditure is less than budgeted (due to
  1-year budgeting, poor cash-flow and
  implementation plans, and lack of secure funding)

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KEY CHALLENGES IDENTIFIED IN REVIEW

• Finalising establishment and consolidation
• Expanding capacity to provide services,
  particularly free basic services
• Impact of restructuring of electricity
  distribution industry
• Modernising delivery, budgeting and financial
  management systems
• Improving debt management
• Improving revenue collection

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ADDITIONAL CHALLENGES IDENTIFIED BY dplg

• Policy
• ? Clear fiscal framework for local government and
  implications for different categories of
  municipalities
• ? Sufficiency of revenues to meet expenditure
  needs
• ? Measures needed to ensure financial viability
  of municipalities with weak economic and tax base

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ADDITIONAL CHALLENGES IDENTIFIED BY dplg

• Planning
• ? Linking integrated development planning to
  budgeting
• Monitoring and evaluation
• ? Municipal performance in reducing backlogs in
  service delivery
• ? Ensuring that grants are being spent for
  intended purposes

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KEY dplg INITIATIVES

• Policy
• ? Division of powers and functions between
  Category B and C municipalities finalized and
  published in January 3, 2003
• ? Property Rates Bill before Parliament
• ? Policy Framework on Division of Fiscal Powers
  and Functions between Category B and C
  municipalities
• ? Policy Framework on Reform of RSC Levy

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KEY dplg INITIATIVES

• Implementation
• ?Establishment of Municipal Revenue Enhancement
  Fund
• ? Consolidation of Capacity Building Grants
• Consolidation of Municipal Infrastructure Grants
• Monitoring and Evaluation
• ?Project Viability monitoring of municipal
  finances

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CHAPTER 10 PERSONNEL

• Provinces ahead of local government in
  restructuring personnel regimes
• Due to the fact that municipalities have recently
  undergone final phase of demarcation in December
  2000 (after interim phases in 1993 and 1996)
• Nevertheless, both spheres focusing on improving
  skills profile, dealing with surplus staff,
  attracting professional and managerial expertise,
  and improving work performance

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KEY CHALLENGES IDENTIFIED IN REVIEW

• Improvement in performance management
• Development of performance-based remuneration and
  reward systems
• Adoption of more flexible personnel frameworks

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ADDITIONAL CHALLENGES IDENTIFIED BY dplg

• High level of staff turnover in municipalities
• Unfilled posts at managerial level in
  municipalities
• Transfer of DWAF staff to municipalities with
  transfer of water schemes
• Coordination between SALGA, sector SETA and dplg
  wrt training and capacity

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KEY dplg INITIATIVES

• Establishment and Piloting of Performance
  Management System
• Analysis of Creation of Single Public Service
• Development of Guidelines on Remuneration of
  Municipal Managers

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KEY INTERVENTIONS WITH REGARD TO PCC RESOLUTIONS

• Intergovernmental Relations
• ?dplg to finalise drafting and implementation of
  legislation on IGR
• Integration in Planning, Budgeting,
  Implementation and Monitoring
• ?Provinces to finalise review of Provincial
  Growth and Development Strategies (PGDS)
• ?dplg to develop generic and sector guidelines to
  inform and strengthen IGR and support municipal
  IDPs

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KEY INTERVENTIONS WITH REGARD TO PCC RESOLUTIONS

• Targeted Support Programme for Provinces
• ?Supporting Premiers office to coordinate IGRs
  within provinces and national government
• ? Aligning provincial and local IDPs and service
  delivery
• Intergovernmental Fiscal Relations
• ?Review local government equitable share formula
• ?Consolidate conditional grant system into MIG

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KEY INTERVENTIONS WITH REGARD TO PCC RESOLUTIONS

• Municipal Viability and Debt Management
• National Revenue Enhancement Programme
• ?Indigent policy, credit control and billing
  systems
• Capacity Building and Leadership Development
• ? ? Establishment of PIMSS centres
• ? Establishment of LOGOLA

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KEY INTERVENTIONS WITH REGARD TO PCC RESOLUTIONS

• Infrastructure Investment and LED
• ?Consolidation of infrastructure grants into MIG
• Free Basic Services
• ? Focus on municipalities that do not have basic
  infrastructure in place
• ?Ensure that each Premiers office establishes an
  Intergovernmental Task team on FBS

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CONCLUSION

• Intergovernmental Fiscal Review 2003
• Substantial progress
• Challenges Remain
• Interventions

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• THANK YOU