Councils told to collect their own revenue

THE National Treasury says municipalities can raise more money from various sources of revenue to increase their budgets.

This follows concerns raised over the small share of the funds allocated by the Treasury to municipalities as against the larger budgets given to national and provincial departments.

For years municipalities have been getting 9% of the total Budget from the National Treasury.

In a written reply to the joint committee on finance recently, the

Treasury said municipalities were on a better footing to raise more funds, and added that municipalities were getting revenue from water, electricity and refuse removal.

“If all of the revenue collected by each sphere is accounted for, then local government’s share of total revenue raised is about 25%,” the Treasury said.

“The intergovernmental fiscal system acknowledges that the revenue base is very unequally distributed across municipalities, with high revenue potential in areas with strong economic activity, and much weaker revenue potential in most rural areas.

“This is why the division of revenue is structured to allocate more than twice as much per household to rural municipalities than it allocates to urban municipalities through the local government equitable share,” it said.

“These allocations are calculated to fund the cost of delivering a package of free basic services to all households with an income of less than two oldage pensions,” the Treasury said.

In the Budget review, the Treasury pointed out that local government received a smaller share of the cake because of its powers to raise its own revenue.

“Any changes to the structure of the division of revenue would have implications for functions in all spheres of government,” the review states. It warned that municipalities raised 70% of their own revenue, but could increase this amount if they improved their revenue collection.

It said in the 2017/18 financial year about half of the municipalities collected only 80% of their revenue. The review also noted that some municipalities were in financial distress.

Releasing the outcome of his investigations, Auditor-General Kimi Makwetu had also found a deterioration in the finances of municipalities.

A new law has given Makwetu powers to clamp down on corruption in municipalities. This would reduce the irregular expenditure that has surged over the years, and runs into billions of rand. The AG said corruption was rife in some municipalities.