Equitable Shares: briefing by Department

Meeting report

______________________________________________________________
CONTACT TRUST
Your experts in natural resource policy and legislation information services

Tel: (021) 426 1446
email: [email protected]
www.contacttrust.org.za
______________________________________________________________

The aim of this report is to summarise the main events at the meeting and identify the key role players. This report is not a verbatim transcript of proceedings.

PORTFOLIO COMMITTEE ON WATER AFFAIRS AND FORESTRY
5 June 2002
BRIEFING ON EQUITABLE SHARES BY THE DWAF

Chairperson: Ms B.P. Sonjica

Documents handed out:
Local Government Equitable Share
Water Services Finances & the Equitable Share

SUMMARY
Ms Wendy Fanoe from the Department of Provincial and Local Government briefed the committee on the department's Local Government Equitable Share.

Amongst other key points, Ms Fanoe went through the background to the equitable share transfers, noting that this was just one way national government was supporting local government. She showed the committee some of the figures for the last few years on the equitable share allocations, noting a large increase for 2002/3 and increasing in the next few years. The figures were presented in terms of both provincial and Category A, B and C municipalities. Ms Fanoe noted the various improvements that have been made to the equitable share system and commented that the national government could not be prescriptive about how the equitable share was spent. In general, the national government was trying to promote the use of the equitable share for poverty alleviation and the provision of basic services, particularly, electricity, water, sanitation and refuse. In closing, she noted that there was an ongoing review of local government funding, and the equitable share was one of the first reforms in a package. She emphasised that the reform of local government was going to be a long-term process.

MINUTES
Questions and Discussion

After the two briefings, the Chairperson, Ms B Sonjica, opened the meeting for questions from the Members. The Chair indicated she would take a round of questions, and the presenters would then be able to answer them all at once.

In relation to the 300 Water Service Provider agreements the Department had indicated would be finalised by September 2002, the Chair asked for a breakdown of how many agreements were Public-Private, Public-Public or Public-community agreements.

Mr D.S. Maimane (ANC) thanked the presenters for their information. The key question for public representatives was whether the equitable share was going to be used properly by the Local Governments. He noted that this was a concern of the Financial and Fiscal Commission (FFC) as well, and therefore supported the proposal from the DDG that the Portfolio Committee meets with the FFC.

The Chairperson asked for more information on the Local Government Support Grant, and queried if it was only for local governments in severe financial problems.

Mr P.H.K Ditshetelo (UCDP) asked whether there was enough capacity and training for the municipalities to take over the responsibilities of the water schemes once they were transferred. Secondly, did the local governments cooperate with the Department in terms of the problems discussed such as the misuse of the equitable share? Further, he noted that the equivalent service in different areas would cost different amounts, and wanted to know how this was covered in the allocations of resources for local government.

Mr J.F. Van Wyk (ANC) asked why the equitable share was reduced from last year to this year in certain areas. He queried whether this was a result of bad financial management by the local government. Secondly, he noted that it was vital to communicate the issues relating to the equitable share to communities, in order for them to understand and work with local government. Finally, he noted the Portfolio Committee would be going on a study tour to the Eastern Cape and asked for a list of local governments in the area who would be receiving schemes from the Department.

Mr P.M. Mathebe (ANC) noted that many schemes were not working. He asked what measures would be taken to ensure that schemes that were transferred would be revived and made sustainable.

Ms M.L. Ngwenya (ANC) asked whether the local governments would be able to afford the salaries of staff involved in the transfer of water service schemes. If not, who would cover the cost of the salaries. Secondly, she noted that the DDG had indicated that in situations where local governments were refusing to pay the Department the debt incurred for water service delivery, the DDG had stated that political will was needed to convince the local governments to pay. She asked what political will was required. Further, Ms Ngwenya asked who was responsible for the provision of water and sanitation to schools under the Division of Revenue Act.

The Chairperson asked for clarity on the finalisation of the role and functions of category C and category B municipalities. She noted that in a recent trip to the Limpopo province, the Portfolio Committee had heard from a Category B local government with a strong revenue base, which had had money to expand a service into a neighbouring rural area. However, they were not able to do so as it was a Category C's responsibility.

Prof H. Ngubane (IFP) noted she was glad to see the poverty datum line had been changed to reflect the monthly expenditure of a household rather than the income. She asked whether the entire household, include all dependents, was taken into account when deciding that R1100 was the poverty datum line.

Mr G. McIntosh (DP) noted that the presentation had indicated 344 schemes were to be transferred, but that there were also other schemes operated by the Department. He asked what would happen to the other schemes and the staff. Futhermore, he noted that in a recent study trip to Chile, the poverty research had included questions relating to things like whether there were TVs in the household. He noted that South Africa needed to develop a more sophisticated questionnaire and method of measuring poverty. Finally, he asked when the Properties Bill and Municiple Finances Bill would be completed.

The Chair asked how the lifeline tariffs would relate to the poverty relief/ indigent people policy.

Ms Manzange noted that poverty and unemployment were high, and asked how service providers would know when a household's financial position had changed in terms of free services.

Mr M.M. Masala (ANC) asked what the role of Provincial governments was in the delivery of free basic services.

The Chairperson asked the DDG and Ms Fanoe to respond to the questions.

The DDG stated that with respect to the water service provider agreements set to be completed in September, they were mainly agreements between DWAF and the local governments to ensure the local governments paid for the services the Department was providing. He supported the motion that the Portfolio Committee need to meet with the FFC in order to talk about ensuring the equitable share was used properly.

Ms Fanoe noted that the Local Government Support Grant was a small grant of approximately R160 million a year. The grant was only for use in local government that was in severe financial difficulties and not for those in general financial difficulties. Local governments were required to fill in questionnaires, and after consultation with the Provinces and local governments, teams from the Department of Local and Provincial Government would go and provide support to the local government. The grant was just one of many mechanisms in place to support local governments. Others included assistance to improve IDP's and budget structures.

Mr Sussens from the Department of Water Affairs and Forestry noted that the constitution is very strong on ensuring that local government had the right to determine their own budgets. Therefore National government has very little control over the spending of the equitable share. One possible mechanism for encouraging local government to spend the equitable share on poverty eradication was to only approve other conditional grants if the equitable share was adequately spent. However, they would legally have to be very careful. The general principle, however, was that national government could not be prescriptive about how local government spent the equitable share without first changing the constitution.

Ms Fanoe noted that, in affect, the only people the local governments were really accountable to in terms of spending the equitable share was the local communities and public. There were many legal requirements for public participation in local government processes, including the IDPs, budgets and others. The public needed to be more active in monitoring the spending of the equitable share and keeping local government accountable.

On the issue of lifeline tariffs, Ms Fanoe noted that the tariffs were a way of targeting poor households by providing the basic requirement of the service for free. In a larger municipality, it is easier to provide all users a free basic use tariff, as the expenses can then be recovered from the larger users who use more than the free basic requirement. The tax base in the large municipalities enables them to do this. However, in the case of most rural municipalities, there are not sufficient large users to allow all users to receive the first basic requirement for free. Therefore, in these areas the poor need to be identified, and the free basic requirement provided to them only. All wealthy users need to pay, even for the basic requirement. It needed to be noted that gathering information on who is poor and who should be made to pay was a costly and difficult process. Local governments need to decide which approach they take, as both have advantages and disadvantages.

The DDG stated that the issue of whether the local government had the capacity to take over the schemes was controversial, as many local governments were saying that they should be given a chance before they are just dismissed as not having the capacity. However, there was a joint programme in the Department of Water Affairs and Forestry and Department of Provincial and Local Government.

The DDG added that the department was costing the price of a basket of services in different regions and circumstances and would use the data to allocate expenditure equitably.

Ms Fanoe noted that the issue of infrastructure was vital in terms of making inroads into providing basic services to informal settlements. If the infrastructure was not in place, then basic services were often impossible or useless. National Government had acknowledged that there were substantial areas of backlogs in both rural and urban environments, and that some of the nodal spending was being done in metro areas.

The DDG agreed with Mr Van Wyk that communication of the equitable share and related issues to the public was vital. The Department was embarking on education decision makers, and there were also road shows taking information to the public.

In terms of the water cutoffs, the DDG indicated that the Department of Water Affairs and Forestry was responsible for facing litigation from communities. The Department therefore could intervene in case of cutoffs and would explain to the local government that they had a constitutional obligation not to cut off a basic requirement level of service. The Department was responsible for providing guidelines to the local government on how far they could go in terms of cutoffs.

Ms Fanoe responded to the question on why the equitable share in some areas had dropped by saying that in previous years the equitable share had only been paid to Category A and B municipalities. This year both B and C category had equitable share allocations. When the final powers and functions of local governments were allocated in 2003, further changes may occur.

The DDG agreed to provide a list of local governments in the Eastern Cape that would be receiving the transfers of schemes for the Portfolio Committee to meet with. In response to the question on inoperating schemes, he noted that schemes had collapsed for many reasons. In some cases the schemes were just not technically sound. In others, the schemes were technically sound, but had been designed along time ago for smaller populations. Therefore the scheme could not handle the current demand, and often pressure was low or water flow stopped. In addition, illegal connections were often having a significant affect on water pressure on up stream users.

The Department had allocated funds to try and ensure that schemes were transferred to local government in the best possible state. In some cases, the schemes were too big for a local government to take over. In this case, there was a strong role for the water boards. Similarly, when the local government did not have the capacity to implement a scheme, the water boards could play a role. In general there were a number of considerations before a scheme was transferred, and the receiver had to agree to take over the scheme.

In terms of the salaries of staff transferred, the majority of the staff were operators and maintenance personnel. The local governments would take over the salaries.

In relation to the debt owed to the Department by some local governments, there were cases where the local government had the capacity to pay but was not cooperating. Others were in positions where they could simple not afford to pay. The Department was investigating each case, and would follow up appropriately. In terms of the constitutional requirement for cooperative governance, the Department could not sue the local governments, and political pressure was going to be required.

In terms of providing water and sanitation to schools, the provision of education facilities was a provincial responsibility and provincial education departments were responsible. However, in general they were still trying to find the best way forward for sanitation, and were trying to be flexible to allow those best equipped in the areas to handle it.

Ms Fanoe commented on the poverty datum line measurements, noting that the R1100 expenditure measure was used for determining the poverty levels for the allocation of the equitable share. However, in terms of local government spending, it was up to each local government to determine how they identified and quantified the poverty levels and targeted their expenditure accordingly. The measuring of poverty was always controversial, and StatsSA was continually reviewing and refining their methods.

The Chair indicated that it was vital to explore the implications of water service delivery for communities in terms of additional spin-offs such as increase agriculture, etc. She put it to the Portfolio Committee that they should consider a dedicated meeting this year to look into the additional spin off affects of water service delivery.

Ms Fanoe noted that the Department of Provincial and Local Government believed that local government had a vital role to play in addressing poverty. The Department therefore always spoke of developmental local government. However, realistically it would take up to ten years before local government was really able to have a large impact. She added that the Department was hoping to have both the Property Tax Bill and the Municipal Finances Bill completed before the end of the year.

The Chairperson summed up the meeting and thanked the presenters and the committee for their work. The DDG noted that the meeting had been very beneficial for both themselves and the Portfolio Committee and thanked them for the opportunity.


Should you wish to submit any comments regarding the content of this meeting to the members of the parliamentary committee, kindly email them to [email protected] and we will ensure that they are hand delivered to the members.
The copyright in this material subsists with the Contact Trust. Further distribution or copying of this material is prohibited without the prior agreement of the Contact Trust.
___________________________________________________________________________________