Municipal challenges add to economic woes – BER
SOUTH African municipalities are failing to provide the infrastructure and basic services that allow households a decent standard of living, attract investment and create jobs.
This was the summary of the Bureau of Economic Research (BER) latest report on South Africa’s municipal challenges and their impact on local economic development.
The BER said yesterday that local economic development and better municipal service delivery were vital if South Africa wanted to broaden economic participation and reverse its unemployment trend.
BER senior economist Helanya Fourie said progress in providing more households with access to basic services was slow, and in many instances access was characterised by supply interruptions or poor quality.
Fourie said problems such as supply chain management, poor audit outcomes, high vacancy rates were among a number of cross-cutting problems that inhibit basic service delivery.
“The consequences of these dynamics are seen in overspending of operational budgets and low levels of capital spending, insufficient spending on repairs and maintenance but excessive spending on contracted services, high levels of fruitless, wasteful and irregular expenditure, among others,” Fourie said.
“Municipalities need to provide the infrastructure and basic services that support a favourable investment climate, without which disinvestment, deepening unemployment and poverty may follow.”
BER said two examples illustrated how municipal failure can have a direct negative impact on local economic development. The first was Clover Industries, which announced in June that it would close its cheese processing facility in Lichtenburg in the North West province and move this to an existing plant outside Durban.
Clover attributed the decision to ongoing problems with service delivery by the Ditsobotla Local Municipality, specifically water and electricity outages as well as the poor quality of roads.
The move is estimated to lead to 330 job losses within the Lichtenburg economy.
Another example was Astral foods, one of South Africa’s largest poultry producers, which owns a processing plant in Standerton in the Lekwa municipality.
In 2018, Astral took legal action against the municipality due to severe supply disruptions caused by disintegrating infrastructure.
Load shedding and water shortages reportedly cost the company around R62 million in its latest financial year.
Following a court order, the municipality had to submit a long-term plan about how they were going to repair and improve the infrastructure.
Earlier this year, a new court order was issued requiring the national government and the National Treasury to intervene and prepare a financial recovery plan for the municipality.
With the local government elections two weeks away, the spotlight has been cast on developmental constraints facing businesses and households as a result of failures by their municipalities.
Fourie said it was necessary to strengthen municipal finances and investment, with merit-based appointments and good municipal governance as a prerequisite.
She said the complex developmental problems that South Africa faces cannot be solved with local municipalities operating in isolation.