Budget cuts will hurt municipalities, says Salga
Cash-strapped SA municipalities will face another financial battle in the light of reduced budgetary allocations and lower revenue collections, SA Local Government (Salga) officials told MPs on Wednesday.
The association has, for a long time, argued that the government’s allocation to local government from nationally raised revenue is inadequate.
In terms of last week’s budget, local government — which is at the coalface of service delivery but is weighed down by debt and financial mismanagement — will receive 9% (R138bn) of nationally raised revenue in 2021/2022 and 9.6% (R146bn) and 9.7% (R148bn) in the following two years.
In a presentation on the division of revenue to parliament’s appropriations committee, Salga head of municipal finance Nceba Mqoqi said the association was concerned with the proposed decrease in the local government equitable share by R6.5bn from R84.5bn in 2020/2021 to R78bn in 2021/2022 and its reduction by 0.4% over the next three years, amid the everincreasing number of poor households due to the effects of Covid-19.
“The reduction in the local government equitable share does not serve our communities well in view of the prevailing economic climate, increased unemployment figures and the negative effect of Covid-19 on municipal revenue collections.
“The marginal increase of 7.3% in conditional grants will not ease the pressure on local government to tackle the growing infrastructure backlogs caused by migrations to cities,” Mqoqi said.
REVENUE COLLECTION
He noted that the financial sustainability of municipalities had been worsened by the fact that the revenue they collected declined during the Covid-19 lockdown and the extra R20bn Covid-19 relief municipalities received from the government had not matched revenues collected in the previous year.
Municipalities collected 20% of the billed revenue in the period from April 2020 to June 2020 compared to the collection rate of 93% in the corresponding period in 2019.
A government survey indicated that in the case of four metro municipalities, the own revenue collected was about R4.3bn less.
The Covid-19 pandemic had also required a shift in expenditure to cater for the needs of communities. Municipal expenditure on goods and services, especially water, increased due to extra demands from municipalities to cater for Covid-19related preventive measures such as sanitising public facilities.
Mqoqi said the subsidy amounts in the equitable share for the provision of free basic services to the poor were still significantly lower than the actual costs of providing these services.
Salga supported, and would take part in, research into the actual costs of rendering these services and ensure there was a differentiated approach when allocating the basic services component of the equitable share to municipalities.
He also urged that the government adopt a holistic approach to the debt owed by municipalities, which he said could not be dealt with without tackling underlying systemic and structural issues.
Salga also called for municipalities to be supported, with the creation of capacity to root out and prevent corruption. Training by Salga was made difficult by the high turnover of municipal councillors at every local government election.
Mqoqi stressed the need for accountability by municipalities and supported the idea that the Treasury withhold funds from municipalities that pass unfunded budgets.
In reply to questions, Salga’s chief officer of municipal finance, fiscal policy and economic growth, Khomotso Letsatsi, noted that the local government was highly politicised and this presented challenges. Rather than putting financially stricken municipalities under administration — which only worsened their situation — they should be supported, she said.