COMMENTS ON LOCAL GOVERNMENT BUDGETS AND EXPENDITURE REVIEW

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COMMENTS ON LOCAL GOVERNMENT BUDGETS AND
EXPENDITURE REVIEW

• DEPARTMENT OF PROVINCIAL
• AND LOCAL GOVERNMENT (dplg)

11 NOVEMBER 2008
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FINANCING ISSUES

• Declining user charges in revenue generation as
  national transfers increase This should be
  looked at carefully considering growing levels of
  poverty and indigents
• Underpricing of services should not be an issue
  consideration should be given to collection
  challenges leading into increasing consumer debt
  (60 associated to residents)
• - Pricing correctly might also mean an increase
  in consumer debt
• LG Transfers Review implicates MSIG as worst
  performer based only on the March and not
  appreciating the entire municipal financial year
• Role of National Treasury to be part of the
  collaboration to improve grant performance and
  curb fragmentation

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FINANCING ISSUES

• The following need to be considered in trying to
  understand leveraging private sector funding
• is it true that slow delivery regarding the
  municipal infrastructure as a result of
  insufficient funding
• The amount of money that is available in the
  system (municipal own funs, grants, municipal
  cash investments) need to be understood to get a
  good feel of the challenges facing local
  government infrastructure delivery

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FINANCING ISSUES

• The following need to be considered in trying to
  understand leveraging private sector funding
• Municipal borrowing is a decision of the
  municipal council. How do we encourage municipal
  councils to borrow money. This should done in the
  context of having noted decline in municipal own
  funding to infrastructure
• In general what we are saying is that funding may
  not be an issue and therefore we may need to
  spend time addressing the real challenges that
  affect service delivery.

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FINANCING ISSUES

• The following need to be considered in trying to
  understand leveraging private sector funding
• We also need to understand why municipalities
  have not been considering other service delivery
  mechanism that are effective and efficient
• Outsourcing delivery of infrastructure through
  PPPs and other mechanism
• This we feel may deal with other issues such as
  repairs and maintenance of infrastructure and
  relieve municipalities in terms of operational
  budget challenges

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FINANCING ISSUES

• The following need to be considered in trying to
  understand leveraging private sector funding
• Conclusion that growth in conditional grants to
  fund capital projects reduces appetite to explore
  alternative financing should appreciate the
  criticalness of financial management in relation
  to creditworthiness
• Are the elements of financial viability and
  management in place relationship should be
  extended to the existence of opportunities of
  local economic development increasing level of
  debts does not encourage borrowing
• The analysis will be useful if juxtaposed to
  creditworthiness criteria used for alternative
  financing (borrowing and other mechanisms)

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SERVICE DELIVERY

• One key area important to consider is the
  application of grants aimed to facilitate
  transfer of water schemes in relation to
  operations and maintenance
• Role of DWAF in the analysis of budgets against
  the OM Allocations is critical

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SERVICE DELIVERY

• Through MIG over R30 bln has been transferred to
  municipalities since 2004
• The next MTEF provides over R50 bln (including
  DWAF bulk)
• We are talking over R80 bln grant funding to
  municipalities (excluding municipal own funding)
• But service delivery has been very slow even with
  this huge budgets
• We are talking to NT through the proposed
  differentiated approach to look at effective ways
  of dealing with legacy backlogs

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CONSIDERATIONS

• MFMA CFO Vacancies analysis should be taken to
  the next level that enable understanding of
  issues behind CFOs not being appointed within
  reasonable timeframes
• Mechanisms for response and support must be
  analysed beyond training, guidelines and tools
  (Consideration must be on Hands-On and Technical
  Assistance)
• Personnel the high no of vacant posts should be
  analysed based on the efficiency and
  appropriateness of organograms to match service
  delivery and municipal powers/functions

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CONCLUSION

• The process of compiling the LG Budget and
  Expenditure Review should be reinforced through
  consultation with departments affected by each
  chapter.
• NT should identify relevant players in different
  chapter areas to formulate focus groups to
  analyse and input on the chapters.

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Thank you