Financial and Fiscal Commission (FFC) work on Local Government matters

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Meeting Summary

The Financial and Fiscal Commission (FFC) briefed the Committee on its research and recommendations on local government. The role of the FFC included making annual recommendations on the Division of Revenue Bill and Mid Term Budget Policy Statement which included the Local Government Equitable Share, as well as recommendations in regard to transport, housing, electricity and capacity, across the years 2006 to 2011. It also spoke about the Municipal Fiscal Powers and Functions Act, the Property Rates Amendment Bill, the Local Government Turnaround Strategy and the response from government regarding data issues. FFC had addressed the conditional fiscal transfers and issues relating to local government revenue enhancement programmes, and recommended that government should adopt a standard early warning system for the detection of fiscal stress in municipalities, as well as recommending support of efforts for the estimation of fiscal capacity and efforts of communities.

FFC made recommendations on regionalisation of municipal services and the six Regional Electricity Distributors (REDs). It had asked that the Department of Transport regularly update the South African National Household Travel Survey. Current research projects included defining unfunded mandates and their implications for health, housing and library services. FFC was evaluating problems within the current urban housing delivery system, and the efficiency of local government expenditure, municipal consumer debt, environmental sustainability and climate change, as well as assessing what impacted upon municipal expenditure, local government fiscal performance and the fiscal and economic costs of inappropriate land usage.

Members commented on the need to avoid grouping municipalities for revenue and tax collection purposes. They asked why the FFC was relevant and what powers it had. Members sought clarity on the recommendations made by the Commission in its presentation. They asked why it had taken the Commission seven years to report to the Committee. They suggested that the Committee and the FFC have a better relationship. The idea of a workshop with the FFC and National Treasury was mooted.

Meeting report

 

Local Government issues: Financial and Fiscal Commission (FFC) recommendations and research
Mr Bongani Khumalo, FFC Acting Chairperson, and Ms Sasha Peters, FFC Senior Researcher: Local Government, outlined the FFC’s research and recommendations on local government issues.

The FFC was a permanent statutory body that had been established in terms of Section 220 of the Constitution. It was independent, subject only to the Constitution and the law. The FFC was mandated by legislation, and would make an annual submission of recommendations on the Division of Revenue (DoR) Bill and the Mid Term Budget Policy Statement (MTBPS).

The FFC's composition was set out in terms of Section 221(1) of the Constitution. It comprised a chairperson and a deputy chairperson and seven members as well as two national nominees, two provincial nominees and two local government nominees. At present, it had three vacancies. He highlighted the FFC's general principles to the Committee and tabled a summary of the FFC's cycle to the Committee (see attached document).

The FFC highlighted previous recommendations made in respect of local government by the FFC, and its comment on the Local Government Equitable Share (LES). The recommendations for each year were set out and explained in terms of specific areas, what the recommendations were and government's response. Areas pertaining to the LES, transport, housing, electricity and capacity were set out, from 2006 to 2011.

The FFC had also made recommendations on the Municipal Fiscal Powers and Functions Act (MFPFA), the Property Rates Amendment Bill, the Local Government Turnaround Strategy (LGTAS) as well as the response from government on data issues.

Ms Sasha Peters, FFC Senior Researcher: Local Government Programme, tabled the second part of the presentation, which looked at the FFC's recommendations for the Division of Revenue (DoR) for 2011/12. By way of background, she tabled an outline of the 2010 annual submission. She noted the re-forming of conditional fiscal transfers, as well as local government revenue enhancement programmes and fiscal stress. FFC had recommended that government should adopt a standard early warning system for the detection of fiscal stress in municipalities. Consensus also had to be attained. It had also recommended the support of efforts for the estimation of fiscal capacity and efforts of communities.

The presentation looked at the regionalising of municipal services, as well as the FFC recommendations on the six Regional Electricity Distributors (REDs), (see attached presentation).

The FFC emphasised intergovernmental fiscal matters for urban public transport and its recommendations on this. One of these was that the Department of Transport needed to regularly update the South African National Household Travel Survey.

Mr Jugal Mahabir, FFC Researcher Local Government Programme, presented the final section of its findings to the Committee. He described the FFC's current local government research projects. He said that the FFC needed to define unfunded mandates, as well as to investigate the legal and financial implications of those mandates in relation to health, housing and library services. In regard to human settlements, the FFC was evaluating problems within the current urban housing delivery system. He too noted the FFC’s objections on public transport. FFC was currently researching the efficiency of local government expenditure, municipal consumer debt, environmental sustainability and climate change. Other research projects were assessing what factors were impacting upon municipal expenditure, local government fiscal performance, and the fiscal and economic costs of inappropriate land usage. The FFC sought to build a strong relationship with the Committee. He concluded that the Committee could use the FFC's recommendations to influence policy and also for its oversight.

Mr Khumalo highlighted that the Commission had last sent representatives to the Committee in 2003 and had not been back to visit it since.

Discussion
Mr T Byleveldt (DA; Western Cape) commented that the Committee should strongly support infrastructure development at a municipal level. Ordinary citizens would suffer if infrastructure at a municipal level was not sufficiently developed. Municipalities should not be grouped in terms of revenue and tax collection as it would create unnecessary complications.

Mr M Makhubela (COPE, Limpopo) agreed with Mr Byleveldt’s view on the grouping of municipalities.

Mr A Matila (ANC; Gauteng) asked what the relevance of the FFC was and what powers it had under its purview. What could the Commission do if the recommendations it made to government were not taken on board? He asked about vacancies in the Commission and what impact those had had on its ability to carry out its functions. He lamented the nature of the recommendations in the presentation in that they were too general and not specific.

Mr Khumalo responded that the FFC could only make recommendations in areas it felt were problematic but it was up to Parliament to ensure that those recommendations were taken up and acted upon. This was the first occasion that the FFC had met with this Committee and as such it was important for the Committee to first get a sense of what the Commission dealt with. This explained the general nature of the presentation on the recommendations it had made.

The Chairperson said that it was unclear to the Committee whether the FFC reported to the National Assembly or the National Council of Provinces.

Mr Byleveldt commented that the Commission’s recommendations dealt with substantive and pertinent issues. It was hard to explain why government had not taken on some of the recommendations but that was not the FFC’s problem.

Mr Matila asked why it had taken the Commission seven years to report to the Committee again.

Mr David Savage, FFC Commissioner, responded that the FFC had longstanding relations with other committees in Parliament. It did not have that relationship with the Committee thus it had not reported to it for seven years. It hoped to establish a relationship with the Committee in future.

The Chairperson noted that the Commission’s recommendations were non-binding and generic in nature.

Mr Savage responded that the FFC’s recommendations were non-binding but they were made in order for corrections to be made by government and for Parliament to ensure that those recommendations were implemented. The recommendations were explained in detail in the Commission’s annual and technical reports which the Committee could be provided with. They were merely overviewed in this presentation. The reports were tabled in Parliament annually.

Mr D Bloem (COPE; Free State) commented that the Commission’s seven year absence from reporting to the Committee should be faulted to the FFC’s previous rather than current administrators.

A South African Local Government Association (SALGA) representative present at the meeting commented that the Association had worked closely with the Commission and the issues the FFC dealt with related to other committees and not to this Committee specifically. The FFC’s work on Local Government issues would be important in the future and a closer relationship should be formed between the Committee and the Commission.

Mr Makhubela said that he had had experience working with the FFC in the Select Committee on Finance and had found their input to be invaluable and useful.

Mr Matila said that the FFC would have to explain the recommendations it had made in detail.

Mr Savage reiterated that the recommendations were explained in detail in the Commission’s annual and technical reports which the Committee could be provided with. They were merely overviewed in the presentation. The reports were tabled in Parliament annually.

The Chairperson said that the FFC and the Commission should forge closer ties from now on.

The SALGA representative recommended that in future when the Committee met with the FFC, it should also co-opt National Treasury to participate in such a meeting.

Mr Matila agreed with the recommendation.

Mr J Gunda (ID; Northern Cape) recommended that the Committee have a two day workshop in 2011 with the FFC and National Treasury to go through the matters raised by the Commission.

Mr Khumalo said that the FFC would be happy to have a workshop with the Committee and address outstanding matters. He reiterated that the Commission had good relations with other committees in Parliament and hoped for the same with this Committee.

The Chairperson thanked the FFC for its presentation.

Adoption of Outstanding Reports
The Committee adopted the 2007/08 Performance Report on Northern Cape Municipalities, Progress Reports on the Interventions in Alfred Nzo District, Sunday’s River Valley and Koukamma Local Municipalities in the Eastern Cape, Report on the Joint Workshop with National and Provincial Legislatures on Section 139 of the Constitution, Report on the Oversight Intervention Visit to Msunduzi Local Municipality, and the 2011 First-Term Committee Programme.

The meeting was adjourned.

 

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