Finance Minister Enoch Godongwana says over the next year, National Treasury will work closely with provincial and local governments in order to address “dysfunctional” service delivery.
Delivering his Medium Term Budget Policy Statement this afternoon, Finance Minister Enoch Godongwana explained that the role of municipalities is to shape the living conditions of ordinary South Africans.
“Municipalities shape the living conditions of our people. They ensure that people have access to clean drinking water, energy, housing and sanitation. Yet, several municipalities are dysfunctional, experiencing either financial or leadership crises, reflected in a general inability to deliver services.
“Following a diagnostic review of the local government capacity building system, National Treasury is coordinating with key stakeholders, including the Department of Cooperative Governance, SALGA [South African Local Government Association] and provinces in the design of capacity-building systems towards a more integrated and outcome-focused approach,” he said.
Over the Medium Term Expenditure Framework, at least R523 billion is expected to be transferred to local government to address municipal challenges, including service delivery, stabilising municipalities in immediate distress, and developing longer-run plans to improve capability.
“Over the next three years, we propose allocating 48.4% of available non-interest spending to national departments; 41.4% to provinces, and 10.1% to local government. This will allow provinces to support basic education and health services, roads, housing, social development and agriculture.
“We are also allocating additional funds to local government to support the delivery of free basic services to poor households, considering the rising cost of the free basic services, as well as rising bulk electricity and water costs. The 2023 Budget Review will provide more detail on these efforts,” Godongwana said.
Meanwhile, Treasury says government is expected to conduct a review of municipal conditional grants in order to ensure more efficient local government.
By March this year, some 90% of municipalities required the intervention of provincial or national government.
“The findings will be used to reform the grant system for greater impact. In light of this review, no large-scale changes will be introduced to existing conditional grants in the 2023 Budget. Preliminary results may inform initial changes to conditional grants in the 2024 Budget,” the department said.
Meanwhile, National Treasury says it is strengthening its early warning system aimed at bringing municipalities to “return to financial sustainability”.
“It aims to address municipal performance failures by prioritising six essential components – funded budgets, revenue management, asset management, audit outcomes, supply chain management and the Municipal Standard Chart of Accounts – and strengthening monitoring and enforcement of financial recovery plans.
“In addition, inductions are underway to educate new councils on the intervention and how it benefits the municipality. To date, 27 of the 43 municipal councils have been inducted. The 2023 Budget will provide more detail on these efforts,” the department said.
According to the department, during the third quarter of the 2021/22 financial year, at least 43 municipalities were “experiencing and service delivery crises”.
“To date, interventions have been ineffective largely because of poor coordination among stakeholders, reluctance to address dysfunctional councils, ineffective monitoring and implementation of financial recovery plans, and incorrect application of the framework in section 139 of the Constitution,” National Treasury said.
