Division of Revenue Bill [B4-2012]: public hearings & negotiating mandates

NCOP Appropriations

17 April 2012
Chairperson: Mr T Chaane (ANC)
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Meeting Summary

This meeting was a continuation of the public hearings on the Division of Revenue Bill (DORB) tabled in February. The South African Local Government Association (SALGA) focused on its lobbying function in the local government sphere, especially in relation to municipal finances and noted some of its interventions and the results of these. It described interventions to improve financial management, training programmes for councillors and mayors, induction programmes. It noted that local government was allocated R5.3 billion over the 2012 medium term, with additional funding made available for governance and beneficiation cost for the small municipalities. There was a need for interventions to improve services and address backlogs. There was also a need for local government to enhance revenue capacity and collection. However, even if fraud and corruption were eliminated from local government, there would still remain fiscal gaps, because of unfunded mandates, and the difference between the constitutional mandate of municipalities and their revenue capacity. SALGA stressed that even the increases in allocations were based on an already-low base, and recommended a substantial increase in the allocations in a targeted way, to  focus primarily on the smaller and less capacitated rural municipalities. If local government were to discharge its full constitutional mandate in respect of capital expenditure over a ten-year period, R567 million would have to be raised. The difference between building of infrastructure, and maintaining it, was stressed and SALGA noted that smaller municipalities needed more funding to spend on institutional capacity. It was engaging with National Treasury on the allocation formula. It was suggested that provincial governments must assist municipalities to secure technical capacity to successfully plan big projects and see them implemented. Under-spending complicated policy decisions. It did not feel that the ring-fencing of 15% of the Municipal Infrastructure Grant (MIG) for sport and recreation was helpful, and recommended that the Rural Households Infrastructure Grant needed to be incorporated sooner than 2014. Municipalities should be allowed to start electrifying households, especially by means of renewable energy. Members questioned why SALGA seemed to regard itself as a pressure group, making the point that it raised similar issues year after year, and many of the complaints were themselves within the purview of SALGA to resolve. They suggested that SALGA needed to consolidate all the municipalities’ audit reports and design a programme that would advise municipalities on responsible expenditure. It was suggested that a separate meeting be convened with National Treasury and SALGA to address issues raised.

The Western Cape Provincial Department of Water Affairs noted an error that resulted in figures for Cape Agulhas and Swellendam municipalities being transposed, and indicated that this should be corrected. The error had been notified to National Treasury and the municipalities.

The South African Poor People’s Association (SAPPA) noted that although the budget was good and detailed massive amounts of money, matters were not being attended to on the ground, and people were not getting help where they needed it. The main challenge was lack of information, and the presenter suggested that if the public were to be empowered with real knowledge, this would assist communities in playing an active role. He suggested that the Expanded Public Works Programmes did not amount to real empowerment, despite claims that they did, and instead recommended investment in entrepreneurship, and cooperatives, instead of spending on retail and manufacturing industries. A top-down approach to strategy formjlation was recommended.  Members thought there was merit in the proposals, and they were implementable. There was a need to adopt a top-down approach on strategies where MPs, government officials and business would guide society.

National Treasury noted that although the Bill allowed for 45% of the following year’s budget to be transferred, there was a risk because it was currently transferred unconditionally as it was a direct charge. The conditions
stipulated in the conditional grant framework could not be applicable, for so long as the Act was not enacted. National Treasury suggested that deadlines on the provincial conditional grants be amended to around the middle of May when the Act would be operational. Members did not see that there was a real and substantial risk and voiced concern that National Treasury was treating conditional grants as a separate process from the budgeting process. However, it noted suggestions for the following year.

All provinces except Mpumalanga and North West, who were still meeting to decide on the mandates, noted their  approval for the adoption of the Division of Revenue Bill.

Meeting report

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