Municipalities need to re-examine strategies

THE results of the recent local government elections have attracted a great deal of analysis. Yet we have paid little attention to the many day-to-day local government and broader service delivery issues that confront the political administrators as they take up office.

The National Treasury releases quarterly statistics of income and expenditure by municipalities. The most recent report, issued in June and related to the third quarter of the municipal financial year, showed that consumers owed municipalities R106-billion for services.

The much-contested metropolitan municipalities were responsible for R58.5-billion of this, although they constitute less than 3% of all municipalities and care for less than half the national population.

This implies a serious challenge in terms of municipal resources to meet the rising demand for services in these critical centres.

Municipal debt is rising in the metros and other municipalities. The rise in the former is related to growing unemployment and an increase in household indebtedness; in the latter to a shrinking customer base and inherent institutional and structural issues.

A 2009 World Bank report titled “Improving Municipal Management for Cities to Succeed” states that “cities now host half the world’s population and provide 70% of its gross domestic product, making them ‘engines of growth’ ”.

The National Development Plan states that, “consistent with most of the world, South Africa has experienced rapid urbanisation . . . with about 60% of the population urbanised”. It notes that movements into and within municipalities have significant implications for planning, budgeting and service delivery.

Compounding the challenges of municipalities are persistent social and economic headwinds. Here and across the globe, governments face growing fiscal challenges as growth slows and tax revenues decline. While the demand for services is rising, fiscal resources to meet everexpanding needs are constrained.

According to Stats SA, 3.5 million households are classified as indigent by municipalities — households which, depending on criteria, qualify for free or discounted services. So municipalities have to provide services to a growing base of needs, and in an equitable way.

Globally, we are seeing changes in the way municipalities structure themselves and execute such duties. Many are becoming self-reliant in terms of revenue. They also have to create environments conducive to growth and development.

South African legislation has gone quite a distance in providing autonomy to municipalities to levy taxes and surcharges, even though these have limitations.

A key challenge is to convert revenue into cash to meet day-to-day requirements.

The abiding question relates to how municipalities prevent the accumulation of consumer debt. Some conversion strategies may be in order, from understanding the basic reasons why consumers do not pay to why municipalities do not

Consumers owed municipalities R106-billion for services

collect or enforce payment.

Until now, some of the conversion strategies have been narrow in approach. Some of the reasons may be the way municipalities understand — or fail to understand — their consumers, to the way they price services, and even the way they structure themselves. How they structure themselves depends on the role they see for themselves — as providers of goods and services in a competitive environment, or as bureaucratic bodies.

Perhaps it is time municipalities adopted a holistic value-chain approach in executing their mandate, which, on the one hand, would address day-to-day issues, and, on the other, implement sustainable remedies to eliminate institutional and structural deficiencies.

Their life cycles will depend on their success in being institutions of development on which citizens can depend to further their aspirations. Given the dramatic shifts we saw in the recent elections, the change in outlook has never been more urgent.